Co-origination of lending to MSMEs picking up

Edelweiss, Central Bank partner for priority lending

MUMBAI: Co-origination in lending is going to give the much-needed leg-up to the thousands of MSME units in the country that are historically denied access to funding.

ECL Finance Ltd, a subsidiary of Edelweiss Financial Services Ltd and Central Bank of India (CBI), signed an agreement for Priority Sector Lending to Micro, Small and Medium Enterprise (MSME) customers.

The partnership follows the Reserve Bank of India (RBI) announcement on the progressive Co-Origination Policy in September 2018, allowing banks and NBFCs to co-lend to a wider set of enterprise owners.

This is the first such Co-Origination partnership of Central Bank of India with an NBFC. With this alliance, Edelweiss and Central Bank of India, aim to create a conducive lending environment and democratise access to credit.

For Central Bank of India, this partnership significantly raises its lending profile in the priority sector, through efficient risk mitigation. Edelweiss, on the other hand, brings its expertise in the credit business, to underserved customers in hard-to-reach markets in tier II and tier III cities.

The partnership, hence, combines the strengths of Central Bank of India and Edelweiss, creating a win-win situation for both with maximum benefit being transmitted to the customer.

The partnership aims to facilitate speedy disbursal of credit across a bouquet of products, including machinery and business loans. Enabled by technology, the alliance will ensure robust underwriting for originations, positively impacting the creditworthiness of MSMEs, in over 100 cities in India.

Many MSMEs face challenges of high interest rates or are excluded from access to banking services, given geographical inaccessibility. Through this innovative model of lending, MSMEs will now enjoy a blended lower rate of interest, translating into a lower cost of funds, helping them deploy capital more effectively in their business. Speaking on the development, Rashesh Shah, Chairman & CEO of Edelweiss Group said, “RBI’s guidelines on Co-Origination are commendable. This is also in line with our strategy to partner with public sector enterprises to increase financial penetration and provide easier access to credit products to MSMEs, which form the backbone of the Indian economy. We are delighted to work with the Central Bank of India, to leverage our joint strengths and our large network of clients across India.’’

Speaking on the occasion, Pallav Mohapatra, MD & CEO, Central Bank of India acknowledged that the Finance Minister had announced a slew of growth oriented measures last Friday and had asked banks to implement Co-Origination platforms to extend financial support to MSMEs, a major contributor to exports, GDP and also generate large scale employment.

“We believe that the Co-Origination model will enable easier access to credit under Priority Sector lending for the MSME segment. This partnership shall enable us to collaborate and harness technology, bring in the best practices in credit underwriting finer pricing and render a far superior experience in terms of turnaround time to customers,” he said.

 

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