world is news

RBI broadens co-origination mannequin for precedence sector lending, all NBFCs can collaborate with banks

Spread the news

Mumbai: The Reserve Bank of India on Friday broadened the ‘co-origination mannequin’ following which all non-bank lenders together with housing finance corporations will probably be allowed to collaborate with banks to undertake precedence sector lending. Governor Shaktikanta Das stated the newly christened “co-lending model” will enhance the circulation of credit score to the unserved and underserved sector of the economic system.

In 2018, the RBI had put in place a framework on co-origination of loans by banks and solely a sure class of Non-Banking Financial Companies (NBFCs) have been allowed to associate with banks for lending to the precedence sector topic to sure situations.

This association entailed joint contribution of credit score on the facility stage, by each the NBFCs and banks and in addition sharing of dangers and rewards between them for guaranteeing applicable alignment of respective enterprise goals, Das stated.

“… it has been decided to extend the scheme to all the NBFCs (including HFCs), to make all priority sector loans eligible for the scheme and give greater operational flexibility to the lending institutions,” Das stated.

The resolution 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 suggestions from stakeholders, he stated.

Das added that every one the housing finance corporations will even have the ability to associate with banks.

Regulatory pointers on outsourcing, know your buyer (KYC) should be adhered to by lending establishments beneath the brand new framework as effectively, Das stated.

The revised pointers for the “co-lending model” will probably be issued by finish of the month, he stated.

It may be famous that the RBI has a system of PSL so as to uplift sure deprived sectors of the society and mandates banks to allocate over 40 per cent of their annual lending to those sectors with sub-sector limits.

Spread the news