The Finance Industry Development Council (FIDC) has pitched for inclusion of deposit-taking NBFCs in the co-origination model proposed by the Reserve Bank of India (RBI).
All NBFCs with an asset base of over ₹500 crore (both deposit-taking and non-deposit-taking) should be allowed in this model, Raman Aggarwal, Chairman, FIDC, told BusinessLine .
‘FIDC sees no logic’
FIDC is a self-regulatory body for asset-financing NBFCs. “FIDC welcomes the RBI’s initiative towards co-origination of loans by banks and NBFCs. However, we do not see any logic in restricting it to only non-deposit-taking NBFCs. This shall deny some of the leading deposit-taking NBFCs the chance to participate,” Aggarwal told
He said that the prevailing regulatory framework of the RBI is the same for both deposit-taking and non-deposit-taking systemically important (having asset base of ₹500 crore and above) NBFCs.
“We have requested the RBI to consider allowing all NBFCs with an asset base of ₹500 crore and above (both deposit-taking and non-deposit-taking) to participate in co-origination. This will give a big boost to this model as deposit-taking NBFCs have very large customer bases who would fit in the definition of priority sector,” he said.
RBI guidelines
The RBI is expected to issue the guidelines on co-origination of priority sector loans by end-September 2018.
Aggarwal said that the RBI had shared draft guidelines on co-origination and that the FIDC has given its feedback.
“Such collaborative models are the need of the day as they leverage on the strengths of both entities and also allow both to price their shares independently,” he said.
The RBI, on Wednesday, in a bid to give a leg-up to priority sector lending, said all scheduled commercial banks would be allowed to co-originate loans with non-banking financial companies (NBFCs) for creating eligible priority sector assets.
RRBs, SFBs excluded
However, the RBI has excluded regional rural banks (RRBs) and small finance banks (SFBs) from co-origination, as most of the loans they originate are priority sector loans.
Further, only NBFCs classified as non-deposit-taking systemically-important can get into co-origination arrangements with scheduled commercial banks, the RBI has said.
The central bank had said that the co-origination arrangement should entail joint contribution of credit by both lenders at the facility-level. It should also involve sharing of risks and rewards between the banks and the NBFCs for ensuring appropriate alignment of respective business objectives as per their mutual agreement.
Priority sector loans cover a wide gamut of issues, including loans given to the agriculture sector (farm credit, agriculture infrastructure and ancillary activities), micro, small and medium enterprises (MSMEs), export credit, education, housing, social infrastructure, and renewable energy, among others.
Within priority sector lending, there are sub-targets for agriculture, micro-enterprises, and advances to weaker sections.