RBI asks banks, NBFCs to jointly lend to priority sector

Move aimed at offering lower rates to borrowers

The Reserve Bank of India (RBI) has issued guidelines to banks and non-banking finance companies (NBFCs) for co-origination of loans to the priority sector.

According to the new norms, the arrangement between banks and NBFCs should entail joint contribution of credit and also involve sharing of risks and rewards between them.

Though the loan would be jointly extended to a borrower by a bank and a NBFC, the interest rate should be a single-blended one, the RBI said.

Single-blended rate

“Based on the respective interest rates and proportion of risk-sharing, a single-blended interest rate should be offered to the ultimate borrower in case of fixed rate loans. In the scenario of floating interest rates, a weighted average of the benchmark interest rates in proportion to the respective loan contribution should be offered,” the RBI said.

The move is aimed at offering lower interest rate to the borrower, the central bank said.

“It is envisaged that the benefit of low-cost funds from banks and lower cost of operations of NBFC is passed on to the ultimate beneficiary through the blended rate/weighted average rate,” the RBI said.