DFS MEETING WITH MAJOR BANKS, STAKEHOLDERS
FinMin asks SBI to look
into co-lending issues
Tells lender to set up committee to study problems faced by banks
HARSH KUMAR
New Delhi, 16 May
T
he Union finance ministry
has asked State Bank of India
(SBI) to set up a committee to
address issues related to co-lending
with shadow banks as partners, said
a senior government official.
The Reserve Bank of India (RBI)
has allowed banks to co-lend or co-
originate loans with non-banking
finance companies (NBFCs), includ-
ing housing finance companies, to
enhance credit to underserved sec-
tions. NBFCs can take a maximum
of 20 per cent of a loan, according to
the norms.
“We’ve identified some co-lend-
ing issues and asked SBI to form a
committee. This committee will
include representatives of major
banks and NBFCs,” the official said.
The official said SBI would
appoint one of its officers to look at
why co-lending was not picking up.
“The committee will also look at
why banks are hesitating to go into
co-lending. This will also create com-
mon ground for both banks and
NBFCs. Eighty per cent of the money
comes from banks and 20 per cent
from NBFCs. So banks have suggest-
ed to us providing first-loss cover.
That will make things easy for
banks,” said the official.
On Thursday, the Department of
Financial Services had a meeting
with major public-sector banks like
SBI and Punjab National Bank, and
microfinance institutions.
“We’ve encouraged banks and
NBFCs to enhance their co-lending
activities,” added the government
official. CRISIL Ratings has predicted
the co-lending books of NBFCs will
likely reach ~1 trillion by June, with
a growth rate of 35-40 per cent annu-
ally over the medium term.
During the meeting the finance
ministry took suggestions from
TAKEAWAYS FROM
THE MEETING
 SBI to appoint an officer to look at
why co-lending space is not
picking up
 CRISIL Ratings predicts that the
co-lending book of NBFCs will likely
reach ~1 trillion by June 2024
 Suggestions sought from
stakeholders for the upcoming
Budget and the new government’s
100-day agenda
RBI action could raise business
volatility for some NBFCs: Fitch
ABHIJIT LELE
Mumbai, 16 May
A spate of regulatory actions on non-
banking finance companies (NBFCs)
could raise near-term business
volatility for some entities, said ratings
agency Fitch on Thursday.
Efforts by the Reserve Bank of India
(RBI) to strengthen corporate
governance and risk management
may reduce industry risks, it said.
Regulations are not always
interpreted consistently in the
stakeholders for the upcoming
Budget and the 100-day agenda too.
“We discussed various things,
addressing issues from technology
to cybersecurity,” said a senior gov-
ernment official.
Regarding the RBI’s draft project
financing norms, the official said, “All
stakeholders will provide their feed-
back, which will be consolidated and
submitted to the government. The
Department of Financial Services
 The Finance Ministry expressed
concerns about the high lending
rates of NBFCs
 NBFCs urged the government for
the right for UPI access like banks
financial sector and firms’
implementation varies. The sector has
evolved rapidly but the environment
can make financial supervision more
challenging and contribute to
compliance and governance lapses,
said Fitch.
A series of enforcement actions on
banks and NBFCs has raised
regulatory event risk for the sector than
in the past two years. In March, the RBI
asked IIFL Finance to halt new gold-
backed lending and associated off-
balance sheet funding transactions.
will also comment on the draft
norms.” The recent draft guidelines
by the banking regulator propose a
phased 5 per cent standard asset pro-
vision during the construction phase
even for existing projects.
The finance ministry has also
expressed concern about the high
lending rates of NBFCs.
NBFCs asked the government for
UPI (Unified Payments Interface)
access like banks.