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Finezza is in talks with NBFCs about launching a co-lending platform soon: CEO


For its soon-to-be-launched co-lending management solution platform, fintech startup Finezza is in talks with NBFCs, particularly in the areas of education loans and SME lending, according to its CEO Krishnan Iyer.

Co-lending, according to Iyer, who is also the co-founder of Finezza, aims to address the liquidity and access to credit problems in the priority sectors and will account for a sizable portion of India’s approximately $1 trillion in potential digital financing by 2025.

According to Iyer in an interview with PTI, Finezza already collaborates with some of the top NBFCs and fintechs in the nation. With regard to co-lending, a few sizable NBFC fintechs have approached it and shown a strong interest in utilising its platform.

“Our attempts to build this feature into our loan management system were spurred on by their eagerness and willingness to participate. The fintech NBFCs we’re speaking with specialise in SME financing, education loans, loan against property, and other financial services “said Iyer.

The platform will make it simple for banks and non-banking finance companies (NBFCs) to handle the co-loans they made to priority sectors in accordance with the RBI-approved 80:20 model, where NBFCs must contribute at least 20% of the loan amount and banks must make up the remaining 75%.

The Reserve Bank of India (RBI) had adopted the co-lending concept in 2020 to promote financing in key sectors, including rural areas, renewable energy, education, low-cost housing, and MSMEs.The procedure fixes the NBFCs’ access to capital issue, broadens the banks’ reach in the priority industries, and offers loan to borrowers at competitive rates.

Iyer claimed that Finezza’s platform will eliminate several operational inefficiencies in addition to making it easier to disburse loans under the co-lending model.

Finezza

Iyer responded that co-lending is supposed to address the liquidity problems in the priority sectors when asked about the market size that Finezza is aiming for. Loan syndication by banks has long been an option for major company loans, but the true problem lies in the SMEs, small-ticket house loans, agricultural loans, and other market sectors.

“As a platform provider, even if 1% of this volume flows through our platform, we are looking at a very large market,” he continued. “This market represents a significant share of the almost USD 1 trillion in digital lending opportunity in India (by 2025).”

In a co-lending agreement, the banking partner, who offers the money at a lower rate than the NBFC, provides the majority of the capital to support the loan. However, it is the responsibility of the NBFC to originate the loan, provide customer service, and recover the loan balance.

Bifurcating the principal, rate of interest, and other components like the processing fee, penal interest, and so on, once the loan is recovered presents difficulties in operationalizing the co-lending idea at scale. Working with many co-lending partners by an NBFC further increases operational complexity.

With the aid of Finezza’s loan management system, clients — banks and NBFCs — will be able to set up and maintain co-lending arrangements, manage co-lending relationships, and address their operational and financial concerns.

 

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