Co-Lending Between NBFCs and Banks Expected to Surpass Rs. 100,000 Crore Mark By Mid-2024
As the co-lending model between non-banking financial companies (NBFCs) and banks completes five years, the total loan book under this arrangement is estimated to grow exponentially over the next year. According to a new report by credit rating agency CRISIL, the total amount co-lent by NBFCs and banks together is projected to cross Rs. 1,00,000 crore by June 2024.
The report analyzed data from 100 leading NBFCs representing over 90% of the sector’s total assets under management. It found that only about one-third of these NBFCs currently have an active co-lending portfolio. However, interest from partner banks as well as benefits like access to funding and diversification are expected to boost growth significantly.
Over the medium term, CRISIL expects the co-lending book to expand at an impressive annual pace of 35-40%. Both NBFCs and banks continue to see value in this unique model, which allows for optimal risk sharing while expanding each other’s customer and geographic reach. Further support is also expected from the government’s sector-specific initiatives around MSME lending and affordable housing.
Personal loans currently make up approximately 30% of the co-lending pie. Housing loans follow at 20%, while gold loans and MSME loans each account for 13% of the total portfolio. Secured MSME loans, vehicle financing, and property loans against MSMEs comprise the remaining 20%. While all categories are projected to grow, CRISIL observes that the recent increase in risk weights for unsecured consumer credit may cause personal loan expansion to moderate going forward.
Asset quality has largely remained stable for co-lent loans so far. Sustaining this track record will be crucial for long-term viability, as regulatory frameworks around this collaborative model continue to take shape.
