Money & Banking

Co-lending with NBFCs to power Union Bank’s portfolio

Our Bureau | | Updated on: Dec 23, 2021

Union Bank of India which expects its retail and MSME portfolio to grow by at least ₹7,000 crore next year under the co-lending tie-up with non-banking finance companies, has set up a dedicated branch to sanction the loans within 24 hours.

“We are developing specific products suitable for the co-lending model…We have already have three tie-ups with NBFCs. We are looking at two-three more,” said Rajkiran Rai G, MD & CEO, UBI, at the FICCI-IBA Banking Summit.

NBFCs are more efficient in sourcing, lending and collecting whereas Banks have cheaper funds. So, it is a win-win partnership, he added.

“We are looking at a portfolio (of retail and MSME loans put together) build up of at least ₹7,000 crore to ₹8,000 crore next year.

“This year will go in fine-tuning the products and getting the model right. It is another model, not competing with our regular business,” Rai said.

There are multiple issues, including aligning lending models, valuations, eligibility norms which we need to fix, he explained.

RBI had unveiled a revised CLM in November 2020 to improve the flow of credit to the unserved and underserved sector of the economy. The objective of CLM is to make available funds to the ultimate beneficiary at an affordable cost, considering the lower cost of funds from banks and greater reach of the NBFCs.

Published on December 23, 2021
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