NBFC co-lending AUM nearing Rs 1 lakh crore: Crisil Ratings

Co-lending assets under management (AUM) of non-banking finance companies (NBFC) are nearing Rs 1 lakh crore after more than five years since the model came into being, Crisil Ratings said on Monday.

A study of about 100 NBFCs, accounting for over 90 per cent of the sector's AUM, showed that personal loans alone account for about a third of the AUM, followed by housing loans at 20 per cent and unsecured MSME loans and gold loans each making up 13 per cent of the pie.

Secured MSME (including loan against property) and vehicle loans comprise the rest 20 per cent of the current overall co-lending book, Crisil said.

"Co-lending assets under management (AUM) of non-banking financial companies1 (NBFCs) is nearing Rs 1 lakh crore after more than 5 years since the model came into being," Crisil said.

Under the co-lending model, banks are permitted to co-lend with all registered NBFCs based on a prior agreement. Over the medium term, growth momentum is seen healthy at 35-40 per cent annually, amidst rising interests of partners - NBFCs as well as banks.

"The partners, however, may increase their focus on other asset classes such as loans to micro, small and medium enterprises (MSME) and home loans given higher risk weights for personal loans," Crisil said.

Crisil Ratings Senior Director Ajit Velonie said co-lending is seen as a win-win for NBFCs and banks alike, as it allows sharing of risk and rewards.

"For NBFCs, particularly for mid-sized and smaller ones, it enables access to bank funding as well as diversification in funding avenues. This becomes even more relevant in light of the recent increase in risk weights for bank lending to NBFCs," Velonie said.

For banks, on the other hand, it provides optimal access to niche customers and geographies and also aids them in meeting their priority sector lending targets, Velonie added.