« The banks that participate will take their share of credit on a back-to-back basis in their books. However, NBFCs must keep a minimum share of 20% of individual credits on their books, » said the RBI. NBFCs are not new to the co-origin/co-loan business model because they collaborate with banks in different forms of credit creation. The only difference is that there used to be a form of loss-sharing that is not authorized by the current RBI guidelines. MUMBAI – The Reserve Bank of India today revised the standards for co-origin of loans from banks and non-bank finance companies to finance priority economic sectors and adopted the financing category. In short, the co-origin offers benefits for both banks and non-deposits that NBFCs or digital lenders were earning. CFBCs focused on microfinance and MSME loans have strong medium- and long-term growth potential for businesses and therefore still need financial support. NBFCs rely primarily on dennise markets, bank loans and securitization (including banks) to cover their financing needs. Only the large and much-loved CFFC have access to debt markets, where conditions are not currently favourable. Public sector banks, particularly under the CPA, are within the exposure limits of the NBFC sector and are therefore unable to meet their financing needs.
As a result, many NBFCs, particularly medium-sized enterprises, face financing challenges that limit their growth prospects. Suman Chowdhury, President, Acuity Ratings « The arrival of eligible priority sector loans will provide a good opportunity to grow their assets under management without facing financial challenges or capital constraints. It is clear that NBFCs are not new to the co-origin business model, as they cooperate with banks in various forms of lending, with the exception of a form of loss-sharing that is not authorized by the current guidelines. This framework is relatively transparent with respect to securitization loans and will facilitate healthy growth in priority sector lending under CFFCBs. » Co-provenance of priority sector loans eligible under the RBI guidelines will provide the CFPB with an excellent way to increase their assets under management. It fails to face financing-related challenges or capital constraints. This transparent framework will facilitate healthy growth in priority sector credit from NBFCs. In addition, through co-origin, the banking sector will have another opportunity to meet its priority lending requirements (PSL). Capital Float contributes up to 30% of the loan amount and manages the entire credit process, from customer acquisition to maintenance and collection. This results in low operating expenses for partner banks. There are several other benefits to be gained, such as: The agreement for the co-granting of loans included a joint contribution of loans by the two lenders and the sharing of risks and rewards.
Recognizing that ALM and liquidity crises are limited to a handful of NBFCs/HFC, the Reserve Bank of India (RBI) announced the framework for co-origin of bank loans and non-payments to non-bank finance companies (NBFC) in the priority sector.