The concept of co-lending has existed over the years, however, since the RBI has laid out the framework for co-origination of loans, banks and NBFCs are coming together to make funds available to the priority sector.
Banks have the funds while NBFCs have the reach. A co-lending model enables traditional banks to give out substantially higher amounts of funds while using the working model of fintech for a greater digital reach. A co-lending model proves to be symbiotic in nature for both banks and NBFCs as it will help fill the gaps in the lending segment. It is an effective model as it ensures the use of robust technology to simplify the operational challenges faced by traditional lending models.
While the benefits of a co-lending model are many, enlisted here are the prominent ones ..
Financial institutions have moved digital in order to improve the quality of services and ensure that money not only reaches the ones in need but also at the right time. Using robust technology has enabled improved turnaround time for almost all the processes right from Application to disbursal and deliver the services in real time.
Easy access to funds
Using the digital approach in the lending processes helps make the funds easily available to the ones in most need of it. Loans today are available on easy to use, customer friendly and convenient personal loan apps; that too just a few clicks aways. All one requires is a smartphone and 5 minutes of time. So for consumers, it is the best of both worlds, as both digital channels and physical branches are available when a digital lender and bank come together under a co-lending model.
The co-lending model is usually established to cater to the needs of the priority sector and to push credit through the economy. A variety of products can be served at lower interest rates to these customers. Thanks to technology led algorithms brought in by digital lenders, , the cost of acquiring customers and providing them what they need is also substantially lower. Additionally, the lower cost of capital brought in by banks further lowers the overall cost, the benefit of which can be passed on to the borrowers.
As against traditional lending techniques, FinTechs use digital platforms to enhance their reach to potential customers. This helps cater to the needs of borrowers across multiple geographies. A co-lending model helps fuel the economically weaker strata with the funds they require.
The entire process being automated, borrowers can get access to funds from the comfort of homes. Application to disbursal can all be carried out at your fingertips. Initially, verification processes had to be carried out manually, however, new age lenders have adopted eKYC and Video KYC to simplify the process further. This drastically reduces the time and human effort that would be consumed otherwise.
Bank of Maharashtra (BOM) and LoanTap have recently tied-up for strategic co-lending to the MSMEs. This model ensures borrower’s convenience right from on-boarding of customers to loan disbursement and monitoring. The initiative aims at providing a hassle free and easy process to those customers who are looking forward to avail a loan to fund their businesses with an MSME loan.