Mumbai: The Reserve Bank of India (RBI) on Wednesday asked banks and certain non-banking finance companies (NBFCs) to join hands and provide loans to the priority sector.

The apex bank said it is taking this step to provide a much needed competitive edge to priority sector lending.

All scheduled commercial banks (excluding regional rural banks and small finance banks) have been allowed to co-originate loans with NBFCs- Non-Deposit taking-Systemically Important (NBFC-ND-SIs) to build priority sector assets.

"The co-origination arrangement should entail joint contribution of credit by both lenders at the facility level. It should also involve sharing of risks and rewards between the banks and the NBFCs for ensuring appropriate alignment of respective business objectives, as per their mutual agreement," the central bank said. The RBI will issue detailed guidelines in this regard by September.

Speaking to reporters at the customary post policy meet, RBI deputy governor Mahesh Kumar Jain said such a convergence between banks and NBFCs can bring the strengths of both the sectors together.

"While it would ensure skin in the game for both the parties, it would benefit the priority sector beneficiaries in terms of cost of credit, which on account of blending could be substantially lower," he added.

Priority sector loans are advances for certain segments such as agriculture, small and marginal farmers, micro-enterprises, export credit and housing finance among others.

Trade timings

The RBI on Wednesday said it will set up a committee to look into demand for extending the market timings for segments such as currency futures and over- the-counter forex markets.