Source– This post on NBFC co lending is based on the article “NBFCs’ co-lending book set to touch Rs 1 lakh crore’” published in “The Indian express” on 9th April 2024.
Why in the News?
The co-lending book of non-banking finance companies (NBFCs) is projected to hit Rs one lakh crore by June 2024 as per CRISIL Ratings.
About the ‘Co-Lending Model’
1. Introduction- The Reserve Bank of India (RBI) introduced the Co-Lending Model (CLM) in September 2018 to encourage joint loans by banks and Non-Banking Financial Companies (NBFCs) for priority sectors.
2. Extension of credit to priority sectors- This model promotes collaboration between banks and non-bank financial entities to extend credit to the priority sector, which includes agriculture, MSMEs, social infrastructure, and economically weaker sections.
3. Improve Credit Access- The Co Lending Model aims to improve credit access to traditionally underserved sectors, ensuring more affordable loans.
About NBFC
1. NBFC is a company that provides loans, leases, insurance, and other financial services. It is registered under the Companies Act, 1956.
2. There are two types of NBFCs based on their liability structure:
a) Deposit-taking NBFCs (NBFC-D) accept deposits from customers and use that money to provide loans and other financial services.
b) Non-deposit taking NBFCs (NBFC-ND) don’t accept deposits from customers but raise funds through other means, such as issuing bonds or borrowing from banks.
Read more: NBFC
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