SBI to launch co-lending of loans with NBFCs in next 30 to 40 days

State Bank of India is looking to rollout co-lending of loans with non banking finance companies (NBFCs) in the next 30 to 40 days, according to a top official of the bank.
 

The loans, which would essentially be for priority sector, would be on a fully-automated platform. The bank is in an advance stages of discussions to tie-up with four to five large to medium technology savvy NBFCs for this, said SBI deputy managing director Sujit Kumar Varma.
 

"We are close to launch co-lending financing model with NBFCs in line with the RBI guidelines. We will tie-up with 4-5 good medium to large NBFCs," said Varma.

Last year, RBI came out with a notification on co-origination of loans by NBFCs and banks. It allowed banks to tie-up with NBFCs for co-lending under priority sector lending. 
 

“All scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) may engage with NBFC-ND-SIs (hereinafter referred to as NBFC) to co-originate loans for the creation of priority sector assets. The arrangement should entail joint contribution of credit at the facility level, by both lenders. It should also involve sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives, as per the mutually decided agreement between the bank and the NBFC,” the bank notification said.

Notably, many banks are required to deploy about 40 per cent of total credit (40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher) to priority sector. Failing this, they are required to deploy the amount of shortfall in low-yielding  Rural Infrastructure Development Fund (RIDF).
 

Most banks failed to achieve the priority sector lending target last year. According to Verma, the bank was close to achieve it last year.

According to Varma, the bank was in the process of ironing-out deficiencies in technology integration, as the model of co-lending would be completely automated, without manual intervention from onboarding to loan disbursal to tracking.
 

Under the co-lending model, SBI will lend about 80 per cent and the rest by the NBFC .
 

SBI has already a designated official under GeneralManager-alliances is looking NBFCs tieups. 
 

"Entire process of co-lending business model will be automated from business proposal to disbursement to tracking the account. Now,intregation of technology of both the bank and NBFC is underway," Varma said.