The co-lending book of non-banking finance companies (NBFCs) is set to reach Rs one lakh crore by June 2024, according to CRISIL Ratings.
This growth is attributed to increasing interest from partner banks and the advantages of funding access and diversification. CRISIL predicts a healthy growth momentum of 35-40 per cent annually over the medium term.
While partners, including NBFCs and banks, are showing greater interest, they may also focus on other asset classes such as loans to micro, small, and medium enterprises (MSME) and home loans due to higher risk weights for personal loans.
A study by CRISIL of 100 NBFCs, representing over 90 per cent of the sector's Assets Under Management (AUM), highlights these trends. Interestingly, only about a third of these NBFCs currently have active co-lending books.
Ajit Velonie, Senior Director, CRISIL Ratings, said, “Co-lending is seen as a win-win for NBFCs and banks alike, as it allows sharing of risk and rewards. For NBFCs, particularly for mid-sized and smaller ones, it enables access to bank funding as well as diversification in funding avenues.”
“This becomes even more relevant in light of the recent increase in risk weights for bank lending to NBFCs. The model also allows NBFCs to grow in a capital-efficient manner. For banks, on the other hand, it provides optimal access to niche customers and geographies and also aids them in meeting their priority sector lending targets,” Velonie added.
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