Contribution to PM CARES Fund qualifies as CSR expenditure

Vinod Kothari & Company

Further relaxations by SEBI due to Covid-19– third in a row!

Vinod Kothari & Company




Relaxations by SEBI and MCA under disruption scenario: Some FAQs

SEBI relaxes timelines at the time of disruption caused by COVID-19

Vinod Kothari & Company

Below is a short snippet of the relaxed timelines issued by the securities market regulator in the wake of the disruption caused by COVID-19.

CSR funds may be used for COVID-19 relief, clarifies MCA

Team Vinod Kothari & Company |

Updated on 29th March, 2020

Like all other public agencies, MCA has been taking a series of steps in the wake of the rapidly spreading COVID-19 and issued clarification[1] on spending of CSR funds for COVID 19 stating that the amount spent on COVID-19 by companies will count towards CSR spending. The activities falling under item nos. (i) & (xii) of Schedule VII of Companies Act, 2013 undertaken due to COVID 19 shall qualify as CSR activity which covers the following:

  • Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
  • Disaster management, including relief, rehabilitation and reconstruction activities.

Subsequently, the Ministry on 28th March, 2020 has also clarified by way of an office memorandum, that companies contributing towards recently formed Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (‘PM CARES Fund’) shall also qualify as CSR expenditure under item (viii) of Schedule VII of Companies Act, 2013.

Hence, this is the right occasion, and unarguably, one of the noblest causes, to use CSR funds in whatever way, one may think of for the welfare of society.

Notably, substantial CSR money remains unspent, very often for want of appropriate CSR projects. Many companies have to explain the same by finding some reason or the other. Currently the country is passing through an epidemic that has affected the whole world. Hence, companies may come forward and spend their unspent CSR budgets. Indeed companies are also welcome to over-spend this year’s budget pursuant to a proposal in the Companies Amendment Bill which permits carry forward of excess spending as well.

Questions are often being asked – can the company include the expenditure incurred for COVID-19 preparedness for its own employees and workmen – say, giving of masks, sanitizers, or similar expense, as a part of its CSR spending?

Our answer to this question is the same as what we have continuously answered as a part of our FAQs[2] on CSR that CSR is spending on a social cause. An employer spending for the well being, safety or welfare of employees is performing the employer’s legal or moral obligation. That cannot be regarded as CSR. However, if the company spends on COVID-19 preparedness, either by itself or through implementing agencies, for a wider section of public, and its employees or their families are also the beneficiaries of such an exercise, there is no denial as to eligibility of the same as CSR spending.

Our detailed write ups on CSR may be viewed here:

Proposed changes in CSR Rules

Draft CSR Rules Make CSR More Prescriptive

CAB, 2020: Bunch of Proposals for revamping CSR Framework



Reckoning banks’ loans to NBFCs for on-lending to priority sectors for PSL targets

-Financial Services Division (


The Master Direction – Priority Sector Lending – Targets and Classification[1] issued by the Reserve Bank of India (RBI) mandates Scheduled Commercial Banks (SCBs) to lend a specified percentage of their Adjusted Net Bank Credit (ANBC) to the specified ‘needy’ sectors called the Priority Sectors. Further, in order to assist the banks in meeting their Priority Sector Lending targets (PSL Targets) and to extend the reach of credit to these sectors, the RBI has allowed various modes of collaboration between banks and NBFCs. One such mode is lending by banks to NBFCs and HFCs for on-lending to priority sector.

Additionally, through a notification[2] issued in 2019 the RBI provided that the loans extended by the banks to NBFCs on or before March 31, 2020 and which are on-lent to priority sector, shall be eligible to be classified as priority sector lending by the bank. However, notification imposed a cap on the ticket size of the loans originated by NBFCs and they are:

Sector Maximum ticket size of loans
Agriculture ₹ 10 lakh per borrower
Micro & Small enterprises ₹ 20 lakh per borrower
Housing (for on-lending by HFCs) ₹ 20 lakh per borrower

The maximum PSL Target that can be fulfilled by a bank using this mode is 5% of banks’ total PSL. For this purpose, on-lending done by NBFC (except MFIs) and HFCs shall be reckoned.

Considering the credit demand by these sectors classified as ‘priority’ and the outreach of NBFCs, the RBI has issued another notification dated March 23, 2020[3], extending the above mentioned time limit to cover originations during FY 2020-21. Accordingly, the loans originated by banks on or before March 31, 2021 and extended to NBFCs for on-lending to Priority Sectors shall be eligible to be classified under Priority Sector Lending of such bank.

It is noteworthy that since lending to HFCs and NBFC-MFIs by banks for on-lending was already covered under the Master Directions on Priority Sector Lending and there was no time limit provided for such loans under the Master Directions, the provisions of the aforesaid notification relating to the time limit of eligibility shall not be applicable on such bank credit. The time limit applies only for on-lending to agriculture sector and micro & small enterprises.






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