The Reserve Bank of India (RBI) has released the guidelines on co-origination of loans by banks and non-deposit taking Non-Banking Financial Companies (NBFCs) in the priority sector, following its announcement in the August credit policy.
The move is aimed at leveraging the reach of NBFCs to help banks meet their priority sector lending targets, leveraging the reach of NBFCs.
The co-origination arrangement should entail "joint contribution of credit by both lenders", & "sharing of risks and rewards between banks and NBFCs", according to the central bank. Priority sector lending includes loans to sectors such as agriculture, micro enterprises, social infrastructure, education and renewable energy.
The Need for Co-lending:
Before the approval of co lending, banks were lacking the outreach to the priority sector. Banks the past have taken various measure like forming regional rural banks and engaging business correspondents to improve their outreach and to augment the priority sector advance. But the results have shown a slow paced growth in credit to masses in priority sector. Further as we all know NBFC have always faced the issue of shortage of capital and advanced skills for credit processing and analytics for handling massive scale of priority sector lending.
But ven in the past, banks and NBFC have been working together in past too by way of on lending, or sale/purchase of pool of assets for increasing with exposure to priority sector but co lending or co-origination was waiting the green signal from RBI.
Indicative Illustration for Calculation of Blended/Weighted Average Interest Rate
The RBI Guideline:-
RBI vide its notification dated 22.09.18 allowed all scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) may engage with NBFC-ND-SIs (hereinafter referred to as NBFC) to co-originate loans for the creation of priority sector assets. The bank can claim priority sector status in respect of its share of credit while engaging in the co-origination arrangement.
Bu hikaye BANKING FINANCE dergisinin July 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye BANKING FINANCE dergisinin July 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
ICICI Bank partners with PhonePe to offer instant credit on UPI
ICICI Bank announced that it has partnered with PhonePe to offer instant credit on UPI to its pre-approved customers on the app of the digital payments company.
Indiagold Eyes Major Expansion in India's Gold Loan Market
Indiagold, a prominent fintech company specialising in gold loans, is set to disrupt the gold loan industry with its ambitious expansion plans and innovative product offerings.
RBI CIRCULAR
Facilitating accessibility to digital payment systems for Persons with Disabilities Guidelines
Legal News
The Supreme Court announced the launch of a new webpage on its official website providing summaries of landmark judgments.
The Role and Impact of the Insolvency and Bankruptcy Code (IBC) in NPA Recovery
Indian banks, especially grappling with the mounting challenge of Non-Performing Assets (NPAs) within Scheduled Commercial Banks (SCBs), are experiencing a significant downturn in their capacity for credit recycling, resulting in reduced business opportunities and declining profits. However, various factors contributing to the severity of NPA problem are including macro-economic, political, and internal factors, emphasizing the complexity of the issue. With this background, the present study puts an effort to look at the role of the Insolvency and Bankruptcy Code (IBC) in NPA recovery and also showcasing its significance in resolving insolvency and maximizing creditor recovery.
Big Data in Banking: Analysing its Role, Advantages and Challenges
Globally Inflation started rising post April 2021 and went above the target range set by most of the Central Banks. It had remained low and dormant for a substantial duration since the global financial crisis. CPI inflation in developed countries such as US, UK and Euro zone, began to exceed their traditional target of 2% and continue to stay at these elevated levels till recent time.
Is SIP Always the Best Option? A Look into Lump-Sum vs SIP During Volatile Markets
SIP is a method of investing a fixed amount at regular intervals, typically monthly, into a mutual fund. It allows investors to buy more units when prices are low and fewer when prices are high, a process known as rupee cost averaging.
Strategies for Mutual Fund Retail Investors during market downturns
When stock markets experience a decline, mutual fund investors often face a sense of insecurity and apprehension. The volatility can lead to impulsive decisions, which, rather than securing financial health, may impair long-term investment objectives.
The Rise of Green Marketing: Driving Sustainable Change
Green marketing refers to the practice of promoting products or services that are environmentally friendly or sustainable. It involves incorporating eco-friendly elements into various aspects of marketing strategies, including product development, packaging, advertising, and distribution.
Fraud Risk Management In Banking
Fraud risk management is a fundamental aspect of overall Risk Management within the banking sector. In India, banks adhere strictly to guidelines set forth by the Reserve Bank of India (RBI) to prevent, detect, and promptly report fraudulent activities.
