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In recent times where competition is getting so high, people are running short of money to run their businesses and are thinking more for availing for credit front. As there are number of options available to avail Loan from Banks which are ready to provide the financial assistance to the individual and businesses based on their creditworthiness rather than securities.
Individuals and Businesses can now avail Priority Sector Loans from Banks. There are indigenous bankers also which performs the functions in such a way to cater the services to a class of borrowers to whom the bankers cannot reach directly. To meet out the financial crunch, as a financial institution NBFC provides loans for different purposes like home loan, Personal loans and the majority in the business loan which includes working capital loans and term loans.
It is the role of the lending banks to offer such schemes and facilities for individuals and business persons to apply for loans which meet the specific requirement and it should be made in such a way that it motivates all the individuals and businesses for availing such schemes.
Recently RBI has issued circular where individuals and businesses involved in agriculture and MSME have formed a part of priority lending sectors by enlarging the scope by including the infrastructure (Social) and non-conventional energy.
RBI is playing a vital role in providing a priority sector lending by the banks to provide a specific portion of the banks to some specific sectors like MSME, Agriculture, Education, Housing for poor people and other weaker section of the society. For the overall economic development of the country, RBI has also focused on the smaller section of the society by providing priority sector lending on a financial basis.
The applicability and limit for loans for renewable energy i.e. solar power generators and non-conventional energy is stated below –
Note: Businesses like solar based and biomass-based power generators, windmills, micro-hydel plants.
For non-conventional energy based public utilities like street lighting systems, and electricity in remote areas.
NBFCs along with the banks jointly working on Private sector loans to push credit for this sector. The risk and rewards between banks and NBFCs in priority sector loan are involved for proper alignment of the business activities. However, RBI has set the limit in which banks have to lend compulsorily 40% of their net bank credit. Within this overall target of 40 percent, disbursement should be done for the loan process is –
Several guidelines are issued by the RBI related to priority sector lending for banks and NBFCs and their coordination for priority sector lending. The arrangement should be made in such a way by both Banks and NBFCs to raise funds for priority sector lending by leveraging the risk of both NBFCs and the Banks which involves the sharing of risk and rewards by both.
As per the guidelines issued by the RBI, 20% of the credit risk by the way of minimum exposure will be taken solely by NBFC and rest will be balanced by the banks with the maximum flexibility to play their part of loan exposure bearing the credit risk criteria.
NBFCs through their programs explain the borrowers the lending in the priority sector and normal lending. For day to day monitoring and internal check control, both NBFC and banks should follow the provision and guidelines issued by RBI. Both the individual and businesses in priority sector is getting advantage to avail loans which can be utilized to prepare business models and to meet the household requirement where the funds are not sufficient.