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In order to strengthen credit flow to small businesses, the Reserve Bank is finalising guidelines for co-origination lending mechanism, RBI Deputy Governor S S Mundra said on Friday. In the co-origination model banks not only fund micro finance institutions (MFIs) or non-banking finance companies (NBFCs) "for on-lending to ultimate borrowers, rather both of them provide loan at the borrower levels and share the loan amount at agreed percentage", Mundra said. The advantage this can bring is the strength of two sectors together, he said, adding that the MFIs have better understanding at the ground level because they are available at last mile and banks can supplement their resources. "To my mind, rather than simply going for re-financing or onlending, this co-origination can become an important bridge for catering to the MSME sector," he said. Mundra further said that consultations and discussions have already taken place with the banking industry on this issue. "It is something (guidelines) which is in making.
The idea is it can be an alliance of people in lending sector," he said.On Trade Receivables Discounting System (TReDS), Mundra said three entities were given permission for setting up platform for trade discounting. One has already started operation and other two would also start operation very shortly, he said. TReDS, an automated system driven platform is expected to benefit MSMEs by facilitating them to auction their trade receivables at competitive market rates through transparent bidding process on the platform by multiple financiers. The TReDS will be the first attempt in the country to introduce factoring without recourse and help not only quick realisation of receivables but also appropriate price discovery.