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Fostering Financial Collaboration: Exploring Partnerships between Banks & NBFCs

A conversation between Manoj Agrawal from Banking Frontiers and Deepak T R from SimSol Technologies about co-lending between banks and NBFCs:

Manoj: Partnerships between various industries are maximizing customer convenience and driving business growth. What’s your view on collaboration between banks and NBFCs?

Deepak: Banks and NBFCs have indeed been collaborating in India for a considerable time, but their working models differ significantly due to distinct regulatory frameworks. Despite their similar product offerings, these financial entities operate with varying internal structures. However, I see an increasing scope for collaboration as it presents an opportunity to tap into a broader population. The Reserve Bank of India has recognized this potential and issued guidelines for co-lending, intending to foster more inclusive development in the financial sector. By forging strategic partnerships, banks and NBFCs can leverage their respective strengths and address the diverse financial needs of a wider customer base.

Manoj: True, NBFCs are good at sourcing customers, and banks at sourcing funds. Can they find a way to collaborate effectively?

Deepak: Absolutely. While the external appearance of banks and NBFCs might seem similar due to the overlapping product offerings, their internal working models are quite distinct. However, the co-lending models recommended by RBI, especially CLM1 (Co-lending Model – 1), could be a game-changer. In CLM1, the partnership involves both an NBFC and a bank jointly extending loans to borrowers. This model allows for a flexible sharing of risk and returns between the two entities, potentially leading to a win-win situation. Challenges lie in harmonizing credit appraisal processes, ensuring seamless disbursement, and determining the appropriate sharing ratios. But there are solutions like our software, Scolend, that can enable collaborative lending by streamlining these processes and facilitating smooth communication between banks and NBFCs.

Manoj: That’s interesting. Does Scolend cover all the aspects required for such collaboration?

Deepak: Yes, indeed. Scolend is designed to be a comprehensive solution that addresses various aspects of collaborative lending. It encompasses Loan Origination System (LOS) and Loan Management System (LMS) to facilitate the end-to-end loan processing journey. The co-lending module helps in structuring and managing loans originated through the collaborative approach. Furthermore, it offers functionalities for supply chain finance, which can be beneficial for businesses seeking working capital finance and trade credit. Additionally, Scolend includes partner payout features, such as GST and invoicing management, to ensure transparent and accurate settlements between the partnering institutions. The platform also incorporates modules for NACH (National Automated Clearing House) and PDD (Pre-Disbursement Data) management, simplifying the collection and verification of borrower information.

Manoj: Impressive! I suppose you’re continuously improving the platform.

Deepak: Absolutely. As the financial landscape evolves, we remain committed to enhancing “Lending-in-a-box” to meet the ever-changing needs of banks and NBFCs. We are constantly gathering feedback from our partners and clients, incorporating their insights to refine the system further. Our development team is dedicated to staying abreast of regulatory updates and industry best practices to ensure that Scolend remains cutting-edge and compliant.

Manoj: I’m sure many institutions would be interested in exploring Scolend. Where can they find more details?

Deepak: We believe that nurturing strong partnerships between banks and NBFCs can lead to greater financial inclusion and empower businesses and individuals alike to achieve their financial goals. Interested parties can visit our website, where they will find comprehensive information about Scolend’s features and benefits. Also, they can reach us by email at [email protected] and on phone at +91 9920628792 for more information.

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