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13/09/2019 10:35am

Banks-NBFCs to jointly lend money to MSMEs

image Banks-NBFCs to jointly lend money to MSMEs

New Delhi, Sep 13 (KNN) As banks have decided to lend money jointly to increase their credit growth, Praveen Kumar Gupta, Managing Director, State Bank of India (SBI) has said that in the beginning they will sanction loan to Micro, Small and Medium Enterprises (MSME) and later on they will extend it to others.

"We are looking at co-origination in a big way. We have a tie-up with ECL Finance and we will have other partners. We have to merge the platforms of the two entities after it will take off,’’ said Gupta.

‘’In the beginning, we will start with MSMEs and after that we will extend it to others," he added.

More than 60 million businesses comprise of MSME sector in India that drives a substantial amount of economic growth.

Raj Kiran Rai, Managing Director and Chief Executive Officer, Union Bank of India too said that at the onset we will begin with retail and MSME loans.

"The co-lending activities and portfolio buys by banks will take off in a big way. Good portfolios will be bought by banks. We are in talks with three NBFCs for co-lending. At the onset we will begin with retail loans and micro, small and medium enterprise loans," said Rai.

As the economic slowdown has gripped the entire country, banks have decided to and expressed hope to raised their credit growth by jointly lending with Non-banking Finance Companies (NBFCs) which have more borrowers as compare to Banks.

Both banks and NBFCs will finance together the retail loans and home loans, which will help both the entities to build their portfolios. The NBFCs have the customers and banks have the liquidity.

When the overall credit growth for the NBFCs was 25%, banks were growing only at 11 %, the co-lending exercise with the NBFCs will help both to grow their portfolios.

Meanwhile, taking a cue from the others banks, Bank of Baroda (BoB) has also entered into alliances with Srei Equipment Finance and ECL Finance to offer joint loans for infrastructure equipment and MSMEs.

The co-origination plans of the banks are taking place after Reserve Bank of India's (RBI) guidelines on such tie-ups. The alliance aims to leverage the combined reach in Tier II and III markets to ensure timely disbursal of credit to MSMEs.



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