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To boost footprints in the unorganised sector, the State Bank of India is gearing up to start co-lending model for home loans, the bank said on Wednesday. In a co-lending model, essentially two lenders come together to disburse loans. This alliance helps in disbursing a small part of the loan amount and sourcing more clients.

In November 2020, the Reserve Bank of India had allowed the co-lending scheme for banks and non-banking finance companies (NBFCs). The model is aimed at improving the flow of credit to the unserved and underserved sector of the economy and making available funds to the ultimate beneficiary at an affordable cost, considering the lower cost of funds from banks and greater reach of the NBFCs.

"If State Bank of India does get into co-lending model for home loans then this will largely help it to enter those markets that had been the stronghold of NBFCs," said Shobhit Agarwal, managing director and chief executive officer, ANAROCK Capital.

Under this, banks are permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement, the RBI said. The co-lending banks will take their share of the individual loans on a back-to-back basis in their books. However, NBFCs shall be required to retain a minimum of 20% share of the individual loans on their books, the central bank said.

Based on this, the two partner institutions need to enter into an agreement that should specify, terms and conditions of the arrangement, the criteria for selection of partner institutions, the specific product lines and areas of operation, the RBI said. Banks can claim priority sector status in respect of their share of credit while engaging in the co-lending model adhering to the specified conditions, the central bank said.

"Under co-lending model, we may see SBI widening its reach to this unorganised sector. Also, the co-lending partner can help bring in local expertise and assist the bank in doing on-ground due diligence. Thus, it will help boost SBI’s footprint in the unorganised sector," Agarwal said.

PNB Housing Finance is looking at forging tie-ups with some banks for co-lending in the housing loan sector, the lender earlier said. "We have got our policy approved on the co-lending and you will shortly be hearing some announcement from the company in terms of some agreement that we will enter with banks," Hardayal Prasad, managing director and chief executive officer, PNB Housing Finance said.

"Co-lending as a financial tool will go a long way in benefiting the businesses. Real estate sector has been demanding that lending should be eased out and slowly with efforts from govt, RBI and Banks, will definitely help the sector. Gradually we are seeing lot of Banks and financial institutions joining hands to promote this tool and hopefully more financial institutions will come forward to create a favorable eco system for the industry," said Mani Rangarajan, group COO, Housing.com, Makaan.com and Proptiger.com.





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