ALL NBFCs Can Collaborate With Banks: RBI
The Reserve Bank of India on Friday broadened the 'co-origination model' following which all non-bank lenders including housing finance companies will be allowed to collaborate with banks to undertake priority sector lending. Governor Shaktikanta Das said the newly christened "co-lending model" will improve the flow of credit to the unserved and underserved sector of the economy. In 2018, the RBI had put in place a framework on co-origination of loans by banks and only a certain category of Non-Banking Financial Companies (NBFCs) were allowed to partner with banks for lending to the priority sector subject to certain conditions. This arrangement entailed joint contribution of credit at the facility level, by both the NBFCs and banks and also sharing of risks and rewards between them for ensuring appropriate alignment of respective business objectives, Das said. The decision to broaden the scheme has been taken "to better leverage the respective comparative advantages of the banks and NBFCs in a collaborative effort, and to improve the flow of credit to the unserved and underserved sector of the economy" after feedback from stakeholders, he said. Das added that all the housing finance companies will also be able to partner with banks.
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