Even as banks remain reluctant to lend money to non-banking institutions after the default of IL&FS, State Bank of India has tied up with Edelweiss Group to leverage the NBFC's sales and marketing network to extend loans to small and medium businesses.\n\n\n\nThe move comes in the wake of the RBI laying down clear guidelines permitting the disbursement of joint loans under bank-NBFC tie-ups last year. Under the guidelines, the NBFC must provide at least 20% of the loan amount, while the remaining can be provided by the partner bank.\n\n\n\nThe move is considered a less risky and more profitable avenue for banks, compared to lending money directly to NBFCs. It will also help banks meet their priority sector lending targets. \n\n\n\nTypically, small businesses and farmers avoid going to banks for loans due to their reputation for being finicky, while NBFCs are generally more in touch with the needs of small businesses.\n\n\n\nSBI had, earlier this year, set up a special NBFC Alliance department to push loans through the partnership model. \n\n\n\nThe NBFC and the bank can charge different rates of for their respective parts of the loan, but the consumer will be provided with a blended interest rate. Banks usually charge a lower rate of interest compared to NBFCs.\n\n\n\nThe Edelweiss-SBI alliange "aims to leverage combined reach in tier II and tier III markets to ensure timely disbursal of credit to MSMEs," Edelweiss said in its announcement of the tie-up.\n\n\n\n"This collaboration..is a win-win for all involved parties; MSME customers, Banks and Edelweiss, creating a lending environment that truly democratizes credit flows to an important socio-economic segment," the company said.\n\n\n\nThe retail segment accounts for 50 per cent of Edelweiss' credit business, and the SBI deal is the third such co-origination MoU for Edelweiss, after the Bank of Baroda and Central Bank of India. \n\n\n\nTypically, most of the work involved in originating the loan is carried out by the NBFC, which also collects most of the processing fees.\n\n\n\nEdelweiss said such co-originated loans offers it a disbursal model "that is asset light and creates a sound revenue model through fee income. "\n\n\n\n"SBI brings capital flows at low costs, which when combined with Edelweiss\u2019 expertise, would be able to meet the credit needs of MSME customers. For MSME customers, this translates into easy access to credit at lower rates, given a specialized blended rate of interest."\n\n\n\nSpeaking on the development, Rashesh Shah, Chairman & CEO of Edelweiss Group said an economic revival of the India is possible only by making credit available to the small and medium business segment.\n\n\n\n"Edelweiss and SBI are collaborating to make reasonably priced credit accessible for the priority sector segment.\u2019\u2019 \n\n\n\nSpeaking on the announcement, P. K. Gupta, Digital & Retail Banking, SBI said the partnership will boost credit availability to the MSME community. "The wide reach of SBI will give access to cost effective loans to the MSME sector in non-metros.\u201d \n\n\n\nEdelweiss Group has been focusing on partnerships to boost its growth. It has, in recent years, inked deals with Caisse de depot et placement du Quebec, Allianz Investment Management, Bank of Singapore and Arthur J Gallagher.\n\n\n\nMost recently, Edelweiss announced an investment of US$ 75 million (~INR 525 crores), by US-based major Kora Management in Edelweiss Global Investment Advisors (EGIA). A total investment of $200 million is expected in the advisory business, including the investment from Kora Management, the group said.