The Reserve Bank of India (RBI) has revised co-lending norms allowing banks to co-lend with all registered non-banking financial companies (NBFCs) on prior agreement.
NBFCs are, however, required to retain a minimum 20 percent share of individual loans on their books.
Ramesh Iyer, Vice Chairman and Managing Director at Mahindra & Mahindra Financial Services (MMFSL) shared his outlook on the same.
“The credit penetration will grow as well as it will help the retail volumes,” he said in an interview with CNBC-TV18.
“It is a great arrangement where both the entities can be eventually benefited,” he added.
“This clarifies that we complement each other. Working together, deeper penetration, ability to recovery, a large number of people appointed who have local knowledge, all this put to use jointly with the bank with whom any NBFCs will tie up and go deeper,” he added.
He believes choosing the right geographies and products will make the process of tying up with the banks easier.
“Once we agree on the geography and the products and the customers that we are looking at, it is not very difficult to get you into an agreement much earlier," he said.
“We will be lending to all kinds of consumers – automobile, tractors, small traders in the rural markets. I personally think this will help people who will want more than 4-5 year kind of a loan where NBFCs have got the customer but they are conscious of our ALM and therefore maybe we are not either into that kind of customer. Therefore new bunch of customers will come into this,” he said.
"Availability of liquidity has not been an issue for a large NBFC like us", he said.
He expects asset quality to improve over the next 12 months.
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(Edited by : Anshul)
First Published: IST