Mahindra Finance, SBI Forge Co-Lending Ties For MSMEs

Mahindra Finance, a prominent Non-Banking Finance Company (NBFC) and part of the Mahindra Group, has announced a strategic co-lending collaboration with the State Bank of India (SBI). The partnership, as disclosed in an official exchange filing, leverages the distribution capabilities of NBFCs and the cost-effective capital of banks, aiming to broaden access and provide viable interest rates to customers.

Under the co-lending arrangement, interest rates will be customized based on the individual customer's credit profile, ensuring a personalized and competitive financing experience. Raul Rebello, MD & CEO- Designate of Mahindra Finance, expressed enthusiasm about this collaboration, emphasizing their commitment to enhancing financial accessibility and inclusivity while adapting to evolving customer needs.

The primary goal is to jointly offer financial support to customers, particularly to underserved segments of the economy, at an affordable cost. This partnership with SBI represents Mahindra Finance's inaugural co-lending collaboration with a bank and underscores their shared commitment to empowering the MSME sectors.

Within the framework of the agreement, Mahindra Finance will generate leads, oversee loan servicing, and act as the primary contact point for potential customers.

Opportunities for Public Sector Banks

By engaging in co-lending partnerships with NBFCs, Public Sector Banks (PSBs) have the opportunity to leverage the specialized knowledge of NBFCs in specific domains, particularly in areas like financing for MSMEs. The collaboration can not only expand the PSBs' customer base but also enhance their capabilities in assessing the creditworthiness of borrowers. Consequently, this may lead to the provision of larger loan amounts at competitive interest rates. Furthermore, PSBs can streamline their operations by offloading certain aspects of loan origination and processing responsibilities to NBFCs, contributing to overall operational efficiency.

Surge In Credit Demand

According to a recent study, the upcoming festive season is poised to experience a two-fold increase in loan disbursements. The report anticipates a total disbursement amounting to around INR 1,500 crore, driven by an influx of more than 10 lakh loan applications from MSMEs.

A primary catalyst behind this upsurge in approvals for MSME loans is the robust demand for credit from these enterprises. The credit demand from MSMEs is expected to witness a significant increase of 11 per cent, surpassing the 7 per cent growth recorded in the first quarter of the fiscal year.

The outlook for co-lending in India appears promising, driven by a surge in credit demand, the shared objectives of banks and NBFCs to bolster their lending capabilities, enhance operational efficiency, and align with RBI's priority sector lending regulations. For NBFCs, this presents an opportunity to secure additional funds, reduce borrowing costs, introduce innovative financial products, and extend their reach.

In conclusion, the co-lending model serves as a valuable asset in India's credit ecosystem, granting access to credit for the underbanked segments of the population and furthering financial inclusion. As this model continues to evolve and mature, we can anticipate an increased collaboration between PSBs and NBFCs, ultimately leading to expanded access to loan financing for customers.