The Reserve Bank of India’s FAQs on Priority Sector Lending (PSL) clarify various aspects of the regulatory framework. Loans outstanding on April 1, 2025, are assessed for PSL eligibility based on the updated Master Directions. Adjusted Net Bank Credit (ANBC) computation involves adjusting for net PSLCs (buy minus sell), which impact ANBC quarterly until the fiscal year-end. Deposits made with development financial institutions like NABARD, SIDBI, MUDRA, and NHB due to PSL shortfalls count towards respective targets and overall PSL achievement, and are added to NBC for ANBC calculation. Specific methods are outlined for excluding advances against certain FCNR(B)/NRE deposits from ANBC. Bills purchased/discounted are generally included in ‘Bank Credit in India’ and ANBC, and can be classified as PSL if eligible by underlying activity.
Adjustments for differential weights in PSL achievement consider the place of credit utilization, focusing on directly disbursed ‘organic credit’ and excluding inorganic routes like securitization or PSLCs. Sector-specific guidelines cover various aspects: agricultural loans, including those against gold collateral (if for agricultural activity and not solely collateral-based, with due diligence required); loans for agriculture infrastructure and food & agro-processing (subject to an aggregate banking system limit of ₹100 crore per borrower, requiring inter-bank confirmation); and loans for commercial vehicles used exclusively for permitted activities under these categories. Export credit to agriculture and MSME sectors has no upper classification limit. Education loan classification is based on the sanctioned limit (up to ₹25 lakh), with the entire outstanding amount eligible if the sanctioned limit is within the cap. Housing loans to banks’ own employees are not eligible. Lending for social infrastructure (schools, healthcare) can be classified under MSME or Social Infrastructure, but not both, with caps applying only under the latter. For ‘Weaker Sections’ classification, the loan must first be eligible under another PSL category, with specific criteria for partnership firms and companies regarding minority/SC/ST classification. Banks can largely rely on customer declarations for minority/SC/ST status, provided the loan meets underlying PSL activity criteria. Due diligence for securitized assets involves auditor certification and sample checks. PSLC trading registration requires specific details submitted to the RBI. PSLCs are valid until March 31st of the financial year. There are no transaction fees on the e-Kuber portal, and tax implications are bank’s responsibility. Export credit can be the underlying asset for PSLC-General. Foreign banks with less than 20 branches have restrictions on buying PSLC-General. Net PSLC position is considered for reporting and meeting year-end targets. Misclassification of underlying assets affects only the PSLC seller. Premium settlement for PSLC trades is real-time on e-Kuber, with anonymous order matching based on premium and FIFO. Trading hours are specified. On-lending requires banks to classify loans in respective PSL categories only after the eligible entity disburses funds to the ultimate beneficiary and the funds remain deployed in PSL assets, necessitating auditor certification and information sharing. A cap of 5% of previous year’s average PSL achievement applies to bank lending to most NBFCs and HFCs for on-lending, but not to eligible MFIs. Co-lending involves risk sharing, but the bank’s priority sector assets must be without recourse to the NBFC. Direct assignment depends on the bank’s discretion. Co-lending agreements can cap the number/amount of loans originated by the NBFC. Due diligence is required before disbursal in co-lending. Back-to-back lending implies the NBFC disburses first, followed by the bank. Shortfall calculation is based on the simple average of quarterly shortfalls/excesses, requiring contributions to specified funds in case of shortfall.
FAQs on Priority Sector Lending (PSL)
(Updated as on May 08, 2025)
A. Classification of loans
Query 1: Whether the loans that are not classified as PSL on April 1, 2025 can be classified as PSL based on the revised parameters.
Clarification: Priority Sector Lending (PSL) eligibility of loans outstanding as on April 1, 2025 shall be determined with reference to the provisions of the Master Directions on Priority Sector Lending 2025
B. Computation of Adjusted Net Bank Credit (ANBC)
Query 2: How to adjust PSLC buy/PSLC sale in the computation of ANBC?
Clarification: The net PSLC outstanding (PSLC Buy minus(-) PSLC Sell) is added to the Net Bank Credit, as mentioned in para 6 of the Master Directions on Priority Sector Lending 2025 (updated from time to time). Further, a PSLC remains outstanding until its expiry (s. no. ix of Annex to circular on Priority Sector Lending certificates dated April 07, 2016). All PSLCs will expire by March 31st and will not be valid beyond the reporting date (i.e. March 31st), irrespective of the date it was first bought/sold. Accordingly, the effect of PSLC buy is increase in ANBC and conversely the effect of PSLC sell is decrease in ANBC and the net of PSLC buy/sell is adjusted to the ANBC for every quarter. Thus, PSLCs bought or sold in any quarter of a FY will have to be taken into account in all subsequent quarters till the end of that FY.
Query 3: Whether the deposits with DFIs viz., NABARD, SIDBI, MUDRA & NHB on account of PSL shortfall can be counted towards achievement of PSL target/ sub-targets and ANBC?
Clarification: (i) Outstanding deposits with NABARD made on account of PSL shortfall are eligible to be reckoned towards Agriculture sub-target and count for the achievement of overall PSL target as well.
(ii) Outstanding deposits with SIDBI and MUDRA are eligible to be reckoned under MSME lending and count for the achievement of the overall PSL target.
(iii) Outstanding deposits with NHB are eligible to be reckoned under Housing and count for the achievement of overall PSL target.
(iv) All outstanding deposits as above shall be added to Net Bank Credit (NBC) for the computation of ANBC.
Query 4: In terms of paragraph 3 of the circulars DBOD.No.Ret.BC.36/12.01.001/2013-14 dated August 14, 2013, and DBOD.No.Ret.BC.93/12.01.001/2013-14 dated January 31, 2014 banks were advised that advances extended in India against the incremental FCNR (B) / NRE deposits, qualifying for exemption from CRR / SLR requirements under the above circular, will be excluded from the Adjusted Net Bank Credit (ANBC) for computation of priority sector lending targets, till their repayment. What is the method of arriving at the extent of such advances?
Clarification: (i) In terms of the circulars mentioned above, the amount eligible for exclusion from ANBC is the incremental advances extended out of the resources generated from the eligible incremental FCNR (B) / NRE deposits. The incremental advance is calculated as the difference between outstanding advances in India as on March 7, 2014 and the Base Date (July 26, 2013).
(ii) The amount to be excluded from ANBC for computation of priority sector targets will not exceed incremental FCNR (B) / NRE deposits eligible for exemption from maintenance of CRR / SLR in terms of the circulars mentioned above.
(iii) In case, the difference in the amount of outstanding advances between March 7, 2014 and base date is zero or negative, no amount would be eligible for deduction from ANBC for the purpose of arriving at the priority sector lending targets.
Query 5: Are banks permitted to exclude bills purchased/discounted/negotiated (payment to beneficiary not under reserve) while calculating the ‘Bank Credit in India’?
Clarification: The bills purchased/ discounted/ negotiated (payment to beneficiary not under reserve) under LC is allowed to be treated as interbank exposure only for the limited purpose of computing exposure and capital requirements. It should not be excluded from the computation of ‘bank credit in India’ [As prescribed in item No.VI of Form ‘A’ under Section 42(2) of the RBI Act, 1934] which allows for exclusion of interbank advance. While exposure may be to the LC issuing bank, the bills purchased/discounted amount to bank credit to its borrower constituent. If this advance is eligible for priority sector classification, the bank can classify it as PSL. Banks have to take note of the above aspect while reporting Net Bank Credit in India as well as while computing the Adjusted Net Bank Credit for PSL targets and achievement.
C. Adjustment for Weights in PSL Achievement
Query 6: Will the weights be applicable in case of decline in credit or negative incremental credit?
Clarification: If there is a decline in credit, the weighted incremental credit will be zero (0). The methodology as given below will be considered for all the districts for which data is reported in ADEPT and District-QPSA statement. Further, based on the methodology detailed below, banks are expected to monitor their own PSL achievement during the year taking into account the prescription of differential weights for credit in identified districts, for the purpose of trading in PSLCs.
Query 7: What is the criteria for mapping credit to a particular district?
Clarification: For mapping a credit facility to a particular district, the ‘place of utilization of credit’ shall be the qualifying criteria.
Query 8: In case of achieving priority sector targets through indirect routes viz. PSLCs, IBPCs, On-lending, Securitization, Assignment etc., the place of utilization may not be available for mapping the individual account level data. How will the incremental credit be calculated in such case?
Clarification: While calculating district-wise incremental credit for assigning weights, the organic credit i.e. only the credit directly disbursed by banks and for which the actual borrower/beneficiary wise details are maintained in the books of the bank, will be considered. Credit disbursed through the following inorganic routes shall not be considered for incremental weights:
i. Investments by banks in securitised assets
ii. Transfer of Assets through Direct Assignment/Outright purchase
iii. Inter Bank Participation Certificates (IBPCs)
iv. Priority Sector Lending Certificates (PSLCs)
v. Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending
vi. Bank loans to NBFCs for on-lending
vii. Bank loans to HFCs for on-lending
D. Agriculture
Query 9: Can bank loans against gold be classified under priority sector?
Clarification: The PSL guidelines are activity and beneficiary specific and are not based on type of collateral. Therefore, bank loans given to individuals/ businesses for undertaking agriculture activities do not automatically become ineligible for priority sector classification, only on account of the fact that underlying asset is gold jewellery/ornament etc. It may, however, be noted that as per FIDD Circular dated December 6, 2024, it has been advised that banks may waive collateral security and margin requirements for agricultural loans upto ₹2 lakh. Therefore, bank should have extended the loan based on scale of finance and assessment of credit requirement for undertaking the agriculture activity and not solely based on available collateral in the form of gold. Further, as applicable to all loans under PSL, banks should put in place proper internal controls and systems to ensure that the loans extended under PSL are for approved purposes and the end use is continuously monitored.
Query 10: What due diligence should banks ensure while classifying loans under PSL- Agriculture/SMF?
Clarification: Banks should ensure proper documentation for classifying agricultural loans under PSL as approved by their Board. Particularly while classifying loans under agriculture/SMF category, banks should maintain details regarding the location of the land for cultivation, details of crop grown, hypothecation of crops, if any; sanction of loan based on scale of finance, record of field visit by bank officials to monitor end use of agricultural loans, etc. Some of the above aspects should be available with the bank in the absence of copy of land record/lease deed particularly in case of agriculture loans to landless labourers, sharecroppers etc.
Query 11: How should the banks ensure adherence to the credit cap of ₹100 crore from the banking system, while extending credit to activities under ‘Agriculture Infrastructure’ or ‘Food & Agro-Processing’ categories?
Clarification: As per extant guidelines, loans for Agriculture Infrastructure or loans for Food & Agro-processing activity are each subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. In case aggregate exposure across the banking industry exceeds the limit of ₹100 crore, then total exposure will cease to be classified under PSL category. The sanctioned limit of ₹100 crore has to be ascertained facility-wise for a particular entity and is exclusive of the other borrowings of the entity for PSL / non-PSL purposes. However, it needs to be ensured that the bank has assessed and sanctioned separate limits for the specific purpose of Agriculture Infrastructure or Food & Agro Processing activities of the entity, for the loans to qualify as PSL. Banks should take a declaration from the borrower regarding loan/s sanctioned by any other bank/s for the same activity and also independently seek confirmation from those banks. In the scenario, where new sanction by the bank leads to overall limit across banks exceeding ₹100 crore, it will have to inform other banks about the same. Accordingly, all other banks will have to declassify the same from PSL.
Query 12: Loans are extended to cargo companies, shipping companies, roadlines co., transport cos, logistic cos., movers and carriers etc. for purchasing commercial vehicles. These transport and shipping companies act as carriers (‘transporter’) for enterprises which are engaged in food and agro processing business. Are bank loans to such transporters who act as ‘carriers’ and do not engage in any food and agro processing activities themselves, eligible for classification under priority sector?
Clarification: As per Annex-III of Master Directions on Priority Sector Lending, 2025 transportation is an eligible activity under indicative list of permissible activities under Food Processing Sector. However, while classifying any facility to transporters for purchasing commercial vehicles under “Food & Agro-processing” category, it needs to be ensured that the vehicles are used exclusively for transportation of food and agro-processed products or are types of vehicles specifically used for “Food & Agro-processing” e.g. cold storage trucks, vans etc. If the commercial vehicle is also used for transportation of products other than those related to food & agro processing, the facility shall not be eligible for classification under ‘Food & Agro-processing’ category. Such loans may, however, be classified under MSME, if the borrower is eligible for classification as MSME in terms of definition given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector dated July 24, 2017 (as updated from time to time)
Query 13: Are bank loans extended to companies for buying commercial vehicles eligible for classification under “Agriculture Infrastructure” category of PSL?
Clarification: While classifying any facility to transporters for purchasing commercial vehicles under “Agriculture Infrastructure” category, it needs to be ensured that the vehicle is used exclusively for activities that are ancillary to “Agriculture Infrastructure”. If the commercial vehicle is also used for other purposes, the facility shall not be eligible for classification under ‘Agriculture Infrastructure’. Such loans may, however, be classified under MSME, if the borrower is eligible for classification as MSME as per the definition given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector dated July 24, 2017 (as updated from time to time)
E. Export Credit
Query 14: What is the permissible cap for export credit under agriculture and MSME sectors of priority sector lending?
Clarification: Export credit extended by banks to the agriculture and MSME sectors is eligible to be classified as priority sector lending under the respective categories viz, agriculture and MSME, without any upper limit.
F. Education
Query 15: Under the revised PSL guidelines, sanctioned limit has been capped at ₹25 lakhs. If a customer is sanctioned a loan of ₹25 lakhs and the outstanding amount exceeds ₹25 lakhs (say ₹28 Lakhs), in such a scenario whether the entire outstanding will be reckoned for PSL?
Clarification: The outstanding value may exceed ₹25 lakh on account of accrued interest due to moratorium on repayment during the study period. Accordingly, the entire outstanding amount shall be reckoned for priority sector provided the sanctioned limit does not exceed ₹25 lakh.
G. Housing
Query 16: If housing loans are extended to banks’ own employees on commercial terms applicable to other customers, are they eligible for classification under priority sector lending?
Clarification: Housing loans to banks’ own employees are not eligible for classification under priority sector lending, irrespective of whether they are extended on commercial terms or at subsidised rates.
H. Social Infrastructure
Query 17: How is PSL classification considered for lending to Social Infrastructure activities viz. schools etc. (prescribed limit of ₹8 crore) and health care facilities (prescribed limit of ₹12 crore), where such facilities are also eligible to be classified under MSME as per the PSL guidelines.
Clarification: Bank loans for above purposes can be classified under MSME, wherein no cap on credit has been prescribed. However, banks can classify such activities either under MSME or Social Infrastructure, and not both. It may be noted that for classification under Social Infrastructure, the associated cap on credit shall be applicable.
I. Weaker Sections
Query 18: Are all credit facilities extended to the thirteen borrower categories under ‘Weaker Sections’ eligible to be classified under ‘Weaker Sections’ category?
Clarification: For classification under ‘Weaker Sections’, the loans should first be eligible for classification under any of the eight PSL categories as per underlying activity.
Query 19: In case of partnership firms/ private limited companies, can the loan granted be tagged as SMF and Weaker Section, if any of the partner/director is holding Agriculture land upto 2 hectares.
Clarification: As per extant guidelines, SMF includes individuals, SHGs, JLGs, Farmers’ Producer Companies (FPC) and Co-operatives of farmers with the accompanying criteria of membership by number and land-holding. Therefore, loans to partnership firms/co-borrowers or any director of a company holding agriculture land upto 2 hectares are not eligible to be classified under the SMF category of PSL.
Query 20: In case of a partnership firm, if majority of the partners belong to one or the other of the specified minority communities, can the advances granted to the firm be treated as advances granted to minority communities. Further, in case of a private/public limited company, if any of the directors belong to Minority Community, can the loan be classified under weaker section category?
Clarification: As per extant guidelines, priority sector loans are eligible for classification as loans to minority communities as per the list notified by the GoI from time to time. The same may be read with Master Circular- Credit Facilities to Minority Communities which at para 2.2 states “In the case of a partnership firm, if the majority of the partners belong to one or the other of the specified minority communities, advances granted to such partnership firms may be treated as advances granted to minority communities. Further, if the majority beneficial ownership in a partnership firm belongs to the minority community, then such lending can be classified as advances to the specified communities. A company has a separate legal entity and hence advances granted to it cannot be classified as advances to the specified minority communities”
Query 21: Can banks rely on customer’s declaration for Minority/SC/ST category to be included under Weaker section?
Clarification: Declaration by the customer in the application form would suffice for classifying credit facilities to Minorities/SCs/STs under Weaker Sections. However, it needs to be ensured that, the loans should first be eligible for classification under priority sector lending as per underlying activity.
J. Investment by Banks in securitized assets / Transfer of Assets through Direct Assignment/ Outright Purchase
Query 22: How should banks ensure due diligence to ascertain priority sector status of PTC portfolio?
larification: Banks may rely on a combination of auditors’ certification provided by the originating entity and conduct of sample check by their own staff or by an auditor for the purpose. This may be suitably built into their internal policy.
K. PSLCs
Query 23: How can banks register for PSLC trading?
Clarification: The banks are required to submit a request to Financial Inclusion and Development Department, Central Office, RBI at fiddpsd@rbi.org.in to obtain registration for PSLC trading by submitting a) DEA Fund Code b) Customer identification number and c) RBI Current Account number.
Query 24: Can PSLCs be issued for a limited period i.e., for one reporting quarter and multiples thereof?
Clarification: The duration of the PSLCs will depend on the date of issue. All PSLCs will be valid till the end of the FY i.e. March 31st and expire on the next day i.e. April 1st.
Query 25: What are the transaction charges/fees for usage of PSLC module on e-Kuber portal? What are the tax implications of PSLC trading?
Clarification: As per the extant guidelines, no transaction charges/fees are applicable for usage of the PSLC module on e-Kuber portal. The tax implications on account of trading in PSLCs may be determined by the banks in accordance with the applicable tax laws.
Query 26: Does Export Credit form a part of PSLC-General and can banks’ surplus in Export Credit be sold as PSLC-General?
Clarification: ‘Export Credit’ can form a part of underlying assets against the PSLC – General. However, any bank issuing PSLC-General against ‘Export Credit’ shall ensure that the underlying ‘Export Credit’ portfolio is eligible for priority sector classification as per the criteria set for domestic banks.
Query 27: Are Foreign Banks with less than 20 branches permitted to buy PSLC-General for achieving the target of 8% of lending to ‘other than exports’?
Clarification: Foreign banks with less than 20 branches are not allowed to buy PSLC General for achieving their 8% target of lending to sectors other than exports. However, such banks are allowed to buy PSLC Agriculture, PSLC Micro Enterprises and PSLC Small and Marginal Farmer for the same.
Query 28: Will the net PSLC position only be reckoned for ascertaining the underlying asset?
Clarification: A bank can purchase PSLCs as per its requirements. Further, a bank is permitted to issue PSLCs upto 50 percent of previous year’s PSL achievement without having the underlying in its books. This is applicable category-wise. The net position of PSLCs (PSLC Buy – PSLC Sell) has to be considered while reporting the quarterly and annual priority sector returns. However, with regard to ascertaining the underlying assets, as on March 31st, the bank must have met the priority sector target by way of the sum of outstanding priority sector portfolio and net of PSLCs issued and purchased.
Query 29: What happens if the RBI inspection team, at a later date, de-classifies the underlying assets which had already been traded by the bank as PSLC, from eligibility for PSL classification?
Clarification: The misclassifications, if any, will have to be reduced from the achievement of PSLC seller bank only. There will be no risk for the PSLC buyer, even if the underlying asset of the traded PSLC gets misclassified.
Query 30: Is the premium payment to be done through the e-Kuber portal or a separate RTGS transaction?
Clarification: There will be a real time settlement of the matched premium. Accordingly, the respective current accounts of the participating banks with RBI will be debited/ credited to the extent of the matched premium.
Query 31: How does the PLSC order matching take place in the e-Kuber portal?
Clarification: The trading platform will match the buy and sell offer by following the Rule of Lowest Sale offer to the Buy offer and then within that on FIFO basis. For example, a buyer offered to pay 2% premium for a particular PSLC type and the same is available at 1.5%, 1.8% and 2%, the portal will first match with the sale deal at 1.5% and for any leftover units, it will then match with the sale offers of 1.8% and then 2% in that order, provided the buy offer is first in the queue (based on the timing of the placement of the buy offer).
Query 32: Will there be automatic matching of PSLC trades on the e-Kuber portal or can the buyer/seller select the counterparty? Will partial matching also happen?
Clarification: The order matching will be done on anonymous basis through the portal and the buyer/seller cannot select the counterparty. Partial matching will happen depending on the matching of premium and availability of category-wise PSLC lots for sale and purchase.
Query 33: What are the timings of PSLC market in the e-Kuber portal?
Clarification: The normal trading hours shall be from 10 AM to 4:30 PM. The PSLC market operates on all days except Saturdays, Sundays and holidays declared under The Negotiable Instruments Act, 1881 by the Government of Maharashtra.
L. On-lending under Priority Sector
Query 34: What is the methodology to be followed by a bank for PSL classification of lending to eligible entities for on-lending to priority sector?
Clarification: Paras 22, 23 and 24 of the Master Directions on Priority Sector Lending, 2025 permit banks to classify as PSL their lending to NBFCs including HFCs and NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector, for on-lending to eligible priority sectors. Banks may adopt a uniform methodology for PSL classification of on-lending as follows:
a) Classification under PSL:
-
- The banks can classify on-lending to eligible entities in the respective categories of PSL. The classification will be allowed only when the entity has disbursed the Priority Sector Loans to the ultimate beneficiary after receiving the funds from the bank and the funds remain deployed in PSL assets.
- The entities must provide auditors’ certificate to the banks stating that the individual loans of the portfolio, against which on-lending benefit is being claimed, are not being used to claim benefit from any other bank(s). Also, they must put in place a suitable process to flag such loan(s) in their systems to enable internal/statutory auditors as well as RBI supervisors (in case of NBFCs) to verify the same.
b) Information sharing:
-
- The banks may devise internal control mechanisms to ensure that the portfolio under on-lending is PSL compliant. The following information/record, at the very minimum, should be collected by the bank from the eligible entities: name of the beneficiary, amount sanctioned, loan amount outstanding, loan tenure, disbursement date, category of PSL.
Query 35: What is the cap for bank lending to NBFCs and HFCs for on-lending?
Clarification: Bank lending to NBFCs (other than MFIs) and HFCs is subject to a cap of 5% of average PSL achievement of the four quarters of the previous financial year. In case of a new bank the cap shall be applicable on an on-going basis during its first year of operations. The prescribed cap is not applicable for bank lending to NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector. Bank lending to such MFIs can be classified under different categories of PSL in accordance with conditions specified in the Master Directions on Priority Sector Lending, 2025.
M. Co-lending by Banks & NBFCs
Query 36: Does co-lending arrangement allow NBFCs to retain 100% of the risk?
Clarification: While the guidelines allow sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives, the priority sector assets on the bank’s books should at all times be without recourse to the NBFC.
Query 37: Are direct assignment of assets applicable only where bank can exercise its discretion?
Clarification: Only if the bank can exercise its discretion regarding taking into its books the loans originated by NBFC as per the agreement, the arrangement will be akin to a direct assignment transaction. If the Agreement entails a prior, irrevocable commitment on the part of the bank to take into its books its share of the individual loans as originated by the NBFC, it shall not be akin to direct assignment transaction.
Query 38: Does the term “mandatorily” in the CLM guidelines mean that the bank must take all the loans originated by the NBFC or can a cap be affixed on the number and amount in the Master Agreement?
Clarification: Both entities, the bank and the NBFC, shall be guided by the bilateral Master Agreement entered by them for implementing the Co-lending Model (CLM). The agreement may specify any cap on the number and amount of loans that can be originated by the NBFC under the Co-lending model.
Query 39: What will be the fate of loans originated by NBFC, which do not qualify under due diligence checks to comply with RBI regulations on KYC and Outsourcing of activities.
Clarification: If the Master Agreement entails a prior, irrevocable commitment on the part of the bank, it has been advised that the partner bank and NBFC shall have to put in place suitable mechanisms for ex-ante due diligence by the bank. Such due diligence should ensure compliance with RBI regulations on KYC and outsourcing of activities before disbursal of the loans by the NBFC.
Query 40: Does the term back-to-back mean loan accounts will first be opened by NBFC and thereafter bank will open loan accounts in its books or both will open loan accounts and fund them simultaneously based on the loan agreement signed by the borrower with the NBFC.
Clarification: Back-to-back basis implies that the loans will be first opened by NBFC and then bank will open loan accounts subsequently.
Query 41: Based on the loan documents executed, will the NBFC sanction and disburse the whole amount and thereafter approach the bank for reimbursement or will it sanction/ disburse its part of the loan and then approach the bank to sanction/ disburse its part.
Clarification: The bank and the NBFC can decide on this aspect as per the Master agreement between them.
N. Shortfall calculation
Query 42: Is the shortfall in achievement of PSL targets for the year calculated based on the PSL loans outstanding as on March 31st of the financial year?
Clarification: The shortfall/excess in achievement is calculated for each quarter of the financial year. The shortfall/ excess for the year is arrived at by taking a simple average of the shortfall/excess for all the four quarters.
In case of shortfall in achievement of overall PSL target or any of the prescribed sub-targets, the bank will be required to contribute to specified funds maintained with NABARD/SIDBI/MUDRA/NHB.
(Republished with amendments)
