Co-loan model volumes could exceed Rs 30,000 by FY23: U-Gro MD
U-Gro lends between Rs 1 lakh and Rs 3 crore at rates between 8.5% and 18% based on the client’s risk profile.
By Piyush Shukla
The co-lending model is likely to reach total volumes of over Rs 30,000 crore by the end of the next fiscal year (FY2022-2023), as banks rapidly embrace the underwriting model of non-bank financial corporations ( NBFC) and try to match their loans. consistent with that of non-bank lenders, said Shachindra Nath, Executive Chairman and CEO (MD) of U-Gro Capital.
“A majority of people think that co-lending is not possible because banks do it differently and NBFCs do it differently, this may be true today, but it will not remain so in the future because banks are adopting the whole NBFC underwriting model very quickly, ”he told FE.
For U-Gro, he said by the end of next fiscal year (FY23), the goal is to achieve loan disbursements of Rs 9,000 crore, of which around 40 to 50% will be made up of loans. from the co-loan model. At an industry event Thursday, bankers including Union Bank of India MD and CEO Rajkiran Rai G called for co-loaning specific loan products for the model to gain traction.
Rai noted that the different practices adopted by banks and NBFCs for loan underwriting, collection, valuation and margins are a challenge in the current co-lending model. In addition, there are practical issues ranging from getting the right product to changing the bank’s policies and mindset when it comes to risk management practices, he said.
Nath said loan fees from non-bank lenders are a factor in the various costs involved, including cost of credit, operating costs, technology, management, collection, among others. He added that while non-bank lenders and fintech companies like his are to generate decent returns for private investors, they themselves don’t have access to cheap funds.
U-Gro lends between Rs 1 lakh and Rs 3 crore at rates between 8.5% and 18% based on the client’s risk profile. At 8.5%, the lender is able to lend as it has partnered with the Bank of Baroda for the co-loan. If she lent from her own books, the cost of capital would be 10.5%. “We are still able to lend to the client below our cost of capital because there is a partner attached to that,” Nath said.
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