Page 46 - Banking Finance July 2019

ARTICLE

CO-ORIGINATION OF

LOANS - BANKS &

NBFC- THE

BEGINNING OF NEW

ROAD FOR LENDING

he Reserve Bank of India (RBI) has released the The Need for Co-lending:
T guidelines on co-origination of loans by banks and Before the approval of co lending, banks were lacking the
non-deposit taking Non-Banking Financial
outreach to the priority sector. Banks the past have taken
Companies (NBFCs) in the priority sector, following
various measure like forming regional rural banks and
its announcement in the August credit policy. The
engaging business correspondents to improve their out-
move is aimed at leveraging the reach of NBFCs to help
reach and to augment the priority sector advance. But the
banks meet their priority sector lending targets, leveraging
results have shown a slow paced growth in credit to masses
the reach of NBFCs.
in priority sector. Further as we all know NBFC have always
faced the issue of shortage of capital and advanced skills for
The co-origination arrangement should entail "joint
credit processing and analytics for handling massive scale
contribution of credit by both lenders", & "sharing of risks
of priority sector lending.
and rewards between banks and NBFCs", according to the
central bank. Priority sector lending includes loans to sectors
But ven in the past, banks and NBFC have been working
such as agriculture, micro enterprises, social infrastructure,
together in past too by way of on lending, or sale/purchase
education and renewable energy.
of pool of assets for increasing with exposure to priority
sector but co lending or co-origination was waiting the green
About the author signal from RBI.
Sheetal Sharma The RBI Guideline:-
Senior Manager & Faculty
RBI vide its notification dated 22.09.18 allowed all
Bank of Baroda
scheduled commercial banks (excluding Regional Rural Banks
Baroda Academy New Delhi.
and Small Finance Banks) may engage with NBFC-ND-SIs

46 | 2019 | JULY | BANKING FINANCE