NBFC Leaders Advocate Responsible Lending and Equitable Co-Lending with Banks

Non-banking finance companies (NBFCs) are at the forefront of financial inclusion, bridging gaps in credit access for underserved segments. In recent discussions at the ETBFSI NBFC Connect’24 Summit in Chennai, industry leaders underscored the importance of responsible lending practices and equitable partnerships in co-lending arrangements with banks.

Responsible Lending Practices

• Ashish Mehrotra, MD & CEO of Northern Arc Capital, emphasized the significance of reaching the last mile through partnerships. He stated, “As long as we are able to reach the last mile in partnership/co-lending, we bring more value to the ecosystem.” This approach ensures that credit reaches even the most remote borrowers.
• NBFCs adopt a calibrated and responsible underwriting process. Their focus is on understanding borrower needs, assessing risk, and ensuring sustainable credit disbursement. This approach contributes to a healthier credit ecosystem.

Equitable Partnerships

• Vipul Sekhsaria, Co-Founder & COO of Kaleidofin, highlighted the distinction between business correspondent (BC) partnerships and co-lending arrangements. In co-lending, both entities have equal stakes, fostering a collaborative environment.
• Information symmetry plays a crucial role in ensuring scalability. Transparency and shared insights enable effective decision-making and risk management.

Data-Driven Underwriting

• Rakesh Kaul, CEO of Clix Capital, emphasized the diverse needs of borrowers. He stated, “There is no one solution that’ll solve all your needs.” Data-driven underwriting leverages compelling data points, making credit assessment more efficient.
• The formalization of the economy has made underwriting easier. NBFCs leverage this data advantage to tailor lending solutions.

Tailoring Partnerships

• Mehernosh Tata, CEO of Edelweiss Retail Finance, stressed that co-lending is not a one-size-fits-all model. Partnerships should be tailored to specific needs. Strategic collaborations maximize the value each partner brings to the table.

Also Read: Co-lending Model: A Collaborative Approach to Financial Inclusion in India, 2024

In summary, NBFCs and banks must collaborate responsibly, ensuring that credit reaches every corner of society. Equitable partnerships and data-driven approaches will drive sustainable growth in the co-lending landscape. Let’s continue to foster financial inclusion through responsible lending practices and strategic alliances.

 

The article draws insights from the ETBFSI NBFC Connect’24 Summit. The views expressed by industry leaders provide valuable perspectives on the evolving co-lending landscape in India. Responsible lending practices and equitable partnerships remain pivotal for sustainable growth in the financial sector.