IIFL Samasta Finance, which is in the process of raising funds via its maiden bond issue, is working on co-lending partnerships with 4-5 banks as it sees the co-lending model as an attractive one to grow the assets supported by its widespread reach and digital capabilities.
Though NBFCs’ cost of funds is high, a good number of them carry some inherent strengths in geographical reach and origination and servicing capabilities without incurring significant operating costs. On the other hand banks with have ample liquidity are looking to expand their customer base in the remote areas of the country. Thus, the co-lending model helps both partners to draw upon each other’s strengths to serve the bottom of the pyramid.
IIFL Samasta, the microfinance arm of NBFC IIFL Finance Ltd, has already tied up with two banks for co-lending. “We are keen to strengthen our co-lending partnerships with banks and other small NBFCs. This is a viable model to grow the asset without worrying about the capital,” Anantha Kumar T, Chief Financial Officer, IIFL Samasta Finance Ltd told businessline here.
Co-lending provides a new avenue for sourcing funds and infusing additional confidence to increase disbursement through shared funding with partner banks. This is also beneficial to customers in the form of attractive interest rates as against direct lending. IIFL Samasta has a strong physical presence with about 1,500 branches across 22 States.
IIFL Samasta has a co-lending pact with Canara Bank under which it has been offering dairy cattle loans. It has also signed up with the State Bank of India (SBI) and Indian Overseas Bank (IOB). While the IOB partnership is in force, the company is currently engaged in the integration of systems for the SBI pact.
In this partnership, IIFL Samasta would originate and process the loans based on agreed criteria. Banks will fund 80 per cent of the loan generated by the co-lending pact while the remaining 20 per cent will be funded by IIFL Samasta. “We are also in the process of finalising co-lending partnerships with 4 or 5 more banks,” he said.
The company’s co-lending portfolio size is about ₹20 crore. It expects the assets to cross ₹100 crore in this fiscal.
Discussing the microfinance industry, Kumar said the microfinance industry has exhibited good recovery in the past couple of years and H1 of this fiscal as credit costs, provisions, and write-offs have come down when compared with FY23. The second half of this fiscal will see further improvements. Overall, we expect the industry to reach pre-Covid levels by FY25