All non-banking financial companies including housing finance companies will now be included in the co-origination scheme as part of efforts for greater financial inclusion and give more operational flexibility to lending institutions.

“Based on the feedback received from the stakeholders, to better leverage the respective comparative advantages of the banks and NBFCs in a collaborative effort, and to improve the flow of credit to the unserved and underserved sector of the economy, it has been decided to extend the scheme to all the NBFCs (including HFCs), to make all priority sector loans eligible for the scheme and give greater operational flexibility to the lending institutions, while requiring them to conform to the regulatory guidelines on outsourcing, KYC,” said the Statement on Developmental and Regulatory Policies.

Revised norms out soon

The proposed framework will be called as “Co-Lending Model” and the revised guidelines will be issued by the end of the month, the RBI further said.

The central bank had, in 2018, introduced a framework for co-origination of loans by banks and NBFCs for lending to the priority sector subject to certain conditions. The arrangement called for a joint contribution of credit at the facility level, by both the lenders and also sharing of risks and rewards between them for ensuring appropriate alignment of respective business objectives.

A number of banks and NBFCs had tied up for this but many experts said that the model did not see the expected results.

“Now HFCs are included in co-origination of loans with banks. While details are yet to be seen how this works as in the last over two years co-origination could not take off,” said Deo Shankar Tripathi, MD and CEO of Aadhar Housing Finance.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said the move will also help ease credit availability for the real estate sector.