The country's largest lender State Bank of India (SBI) on Thursday said it has entered into co-lending agreements with five housing finance companies to serve the underserved and unserved borrowers.

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The five housing finance companies (HFCs) are: PNB Housing Finance, IIFL Home Finance, Shriram Housing Finance, Edelweiss Housing Finance, and Capri Global Housing Finance.

SBI said the partnerships are aimed at sanctioning home loans to the unserved and underserved sector in line with RBI guidelines. Shortage in affordable housing continues to be a major concern for India, especially for the economically weaker section (EWS) and the informal sections of the society, SBI said in a release.

To further improve the penetration in this segment, SBI is actively looking at co-lending opportunities with multiple HFCs.

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"This collaboration will enhance our distribution network as we aim to extend our credit reach to more home loan borrowers of the unserved and underserved segments. Such partnerships align with our commitment to accelerate effective and affordable credit to small home buyers in India," SBI Chairman Dinesh Khara said.

He said the tie-ups will contribute to the government's vision of 'Housing for All by 2024'.

RBI had issued guidelines on the co-lending scheme for banks and HFCs/NBFCs for priority sector lending to improve the flow of credit to the unserved and underserved sectors of the economy and make funds available to borrowers at an affordable cost.

The co-lending model aims to give the borrower the best interest rate and better reach, it said.

In a separate release, Shriram Housing Finance said the two entities will jointly service housing loan customers as per the 20:80 co-lending model of the RBI.

"The demand for housing is immense in the affordable segment and we have barely scratched the surface. Through the co-lending model, we intend to leverage the balance sheet strength of SBI and our underwriting capabilities," Ravi Subramanian, MD & CEO, Shriram Housing Finance, said.

PNB Housing Finance Managing Director and CEO Hardayal Prasad said: "Our strategic partnership with SBI is an important extension of our retail home loan segment, and will enable us to serve India's working classes and underserved communities better.

"Co-lending is the future of priority sector lending, as it reduces the cost of financing for last-mile borrowers," Prasad said.

Rajesh Sharma, Managing Director, Capri Global Housing Finance, said this partnership will help increase both enterprises' profitability and expand respective home loan portfolios.

"We are confident that the collaboration with the country's biggest lender will open up more opportunities for home finance to every credit-worthy borrower and act as an agent of change in fulfilling the dreams of owning a home," Sharma said.