Why Co-Lending

Co-Lending or Co-origination of loans is an arrangement between Banks and NBFCs (including HFCs) to lend with a joint agreement. In this arrangement NBFCs are required to retain at least 20% share of the loans on their books.This innovation is needed as India has the highest number of credit underserved and unserved consumers, followed by the US, Canada, Colombia and South Africa. Some of the most common loans to be opened by un-served category of borrowers are agriculture and micro finance loans, two-wheelers and consumption loans (personal loan, consumer durable loan or credit card).

The huge credit gap in underserved priority sector lending in India demands more credit model innovation by banks and regulatory bodies . While banks have access to cheap credit and NBFCs have a wider customer base and more streamlined and personalized debt collection processes, this partnership improves access to credit in the priority sectors located in remote locations and reduces default rates. There is greater adoption of technology-centric models at NBFCs and HFCs in delivering product innovation and custom solutions.

Some Notable Co-Lending Partnerships

1. Cars24 and Bajaj Finance partner to provide seamless and frictionless financing to used car buyers.
2. LendingKart announced its co-lending partnership with Non-Banking Finance Company, Northern Arc Capital to disburse over Rs 100 crore as working capital to Micro, Small and Medium Enterprises (MSMEs).
3. SBI has entered into a co-lending agreement with five housing finance companies (HFCs) — PNB Housing Finance Ltd, IIFL Home Finance Ltd, Shriram Housing Finance Ltd, Edelweiss Housing Finance Ltd, and Capri Global Housing Finance Ltd ..
4. Union Bank of India entered into a co-lending agreement with Capri Global Capital Ltd (CGCL), to MSMEs by offering secured loans between Rs 10 lakhs to Rs 100 lakhs. 5. IIFL Home Finance recently tied up with Punjab National Bank and has existing tie-ups with the Central Bank of India, ICICI Bank and Standard Chartered Bank. 6. Home First Finance Company India has entered into a strategic co-lending partnership with Union Bank of India.

Co-Lending with New Age Banking Platform

New Age Banking platforms can help co-lenders reduce the operational challenges of managing co-lending products from origination to management. Finvolv LMS supports both Direct Assignment (transfer of loan from originator to co-lender book) and Co-origination Models.

Why Co-Lend with Finvolv Only

Finvolv LMS provides real time accounting ledger management to seamlessly manage partner ledgers. Credit managers can configure coapprovals through multiple policies and rules on our Credit Engine. It has in-built dashboards for income sharing management and can handle multiple repayment options compliant with both the colenders policies. The platform enables Buyback Accounting and transfer of loan from one book to another and can seamlessly integrate multiple co-lenders using its API first integration approach making the process appear seamless to the end users.

Conclusion

There is a need for proven technology in implementing co-lending models to accelerate the pace of evolution and creation of a digital first economy. This can lead to greater market adoption of co-lending products and availability of cheaper credit to the priority sector. As a result improving their financial security and reducing the credit gap in all priority sectors like MSME, agriculture, cottage industries, social impact Conclusion sectors of climate change, renewable energy and other allied sectors and improve the overall health of the economy. To get a demo of how the Finvolv co-lend works, please write to us at info@finvolv.ai.