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RBI announces co-lending scheme for banks, NBFCs for priority sector

Under the Co-Lending Model, banks will be permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement, RBI said

Topics
RBI | Banks | NBFCs

Press Trust of India  |  Mumbai 

RBI
As per a notification by RBI, NBFCs will be the single point of interface for the customers

The Reserve Bank on Thursday came out with a Co-Lending Model (CLM) scheme under which can provide loans along with to priority sector borrowers based on a prior agreement.

The CLM, which is an improvement over the co-origination of loan scheme announced by the in September 2018, seeks to provide greater flexibility to the lending institutions, the Reserve Bank of India (RBI) said in a release.

Under the CLM, will be permitted to co-lend with all registered (including HFCs) based on a prior agreement, said, adding that "the co-lending will take their share of the individual loans on a back-to-back basis in their books".

"However, shall be required to retain a minimum of 20 per cent share of the individual loans on their books."

The primary focus of the scheme, rechristened as "Co-Lending Model" (CLM), is to improve the flow of credit to the unserved and underserved sector of the economy and make available funds to the ultimate beneficiary at an affordable cost, considering the lower cost of funds from banks and greater reach of the NBFCs, it added.

As per a notification by RBI, NBFCs will be the single point of interface for the customers and shall enter into a loan agreement with the borrowers. The agreement should clearly contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.

"The ultimate borrower may be charged an all-inclusive interest rate as may be agreed upon by both the lenders conforming to the extant guidelines applicable to both," said.

All transactions (disbursements/ repayments) between the banks and NBFCs relating to CLM have to be routed through an escrow account maintained with the banks, in order to avoid inter-mingling of funds.

With regard to grievance redressal, RBI said suitable arrangement must be put in place by the co-lenders to resolve any complaint registered by a borrower with the NBFC within 30 days.

If the complaint is not resolved, the borrower would have the option to escalate the same with the concerned Banking Ombudsman/Ombudsman for NBFCs or the Customer Education and Protection Cell (CEPC) in RBI.

Under priority sector norms, banks are mandated to lend a particular portion of their funds to specified sectors, like weaker section of the society, agriculture, MSME and social infrastructure.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Thu, November 05 2020. 18:37 IST
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