Edelweiss Financial Services said its unit ECL Finance has signed an agreement with Bank of Baroda to explore co-lending or co-origination of loans to small businesses.
The two will offer loans and expertise to MSME (micro, small and medium enterprises), self-employed persons as well as “priority sector groups”.
“Under the arrangement, both partners can widen their respective markets and offer timely delivery of credit to customers at a significantly lower cost,” Edelweiss said.
The move comes at a time of troubles for the non-banking financial services industry of India, to which Edelweiss Capital belongs.
Hurt by a mismatch between assets and liabilities, NBFCs in India are going through a tough phase in which many have found it difficult to source the funds required for disbursement.
On the other hand, banks typically do not lend to the kind of enterprises and persons targeted by NBFCs.
Rashesh Shah, Chairman & CEO of Edelweiss Group said partnerships between NBFCs and banks will benefit both.
“We are delighted to be partnering with Bank of Baroda in this excellent initiative by Shri P Jayakumar, MD. Bank of Baroda, in increasing the reach of credit to service the needs of a large section of India,” he said.
“I do believe that this model of partnership between banks and NBFCs is here to stay, truly democratising access to credit.”
Vikramaditya Singh Khichi, Executive Director, Bank of Baroda said such partnerships will benefit the small industry sector.
“The SME sector is the backbone of the Indian economy, providing millions of jobs, and contributing a significant chunk to industrial growth and the country’s exports. There is huge potential that is untapped in the SME space.
“Co-lending partnerships between large organisations like Bank of Baroda and leading players in finance like Edelweiss will contribute to the overall enhancement of the SME industry, as these enterprises need funding for adopting new technology that will enhance their growth and in turn boost India’s economic growth.”
Deepak Mittal, MD & CEO, ECL Finance said it will be a win-win for everyone.
“This partnership will help Edelweiss keep the needs of our customers foremost and provide them with affordable and timely credit while our proven ability in origination, credit assessment and monitoring asset quality will enhance the portfolio. We believe best use of technology will enable wide reach and enhance servicing capability to this underserved and socio economically important customer segment.”
The Credit business has been a significant growth engine for the Edelweiss Group with the retail credit segment having grown to 50% of the total book at over INR 18,000 crore at the end of FY19.
Edelweiss said its overall credit business has remained resilient amidst tough market conditions due to its diversified business model, risk mitigation and credit assessment policies as well as asset quality and low NPA levels.
In recent months, the Edelweiss Group has announced several partnerships of players like Caisse de dépôt et placement du Québec (one of North America’s largest pension funds), Allianz Investment Management (part of Allianz Group, one of the world’s largest insurers) and Bank of Singapore with its arms such as NBFC ECL Finance, Private Debt and Wealth Management business.