MSME industry bodies seek RBI support for easier priority sector lending

The official further said that the RBI only partially restored this classification to the extent of Rs. 20 lakh per borrower. Hence, NBFCs funding to MSEs is now restricted

The micro, small and medium enterprise (MSME) industry bodies have requested that the Reserve Bank of India (RBI) classify credit provided by banks to non-banking financial companies (NBFCs) for on-lending to MSMEs as indirect finance, making it eligible for classification under the priority sector lending (PSL) of banks. They have also urged the RBI to remove the ceiling of Rs 20 lakh per borrower or raise it to at least Rs 1 crore per borrower. 

Since April 1, 2011, the RBI has made all loans sanctioned to NBFCs (other than microfinance institutions) for on-lending to micro and small enterprises (MSEs)