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Karur Vysya Bank to announce co-lending pacts with more NBFCs
July 31, 2023
Karur Vysya Bank (KVB) is likely to clinch a couple of co-lending deals with more NBFCs (non-banking financing companies) in this quarter as the old private sector lender sees co-lending as a viable opportunity to boost the topline and enlarge its customer base.
With ample liquidity, banks are looking to expand their customer base in the hinterlands of the country. On the other hand, NBFCs’ cost of funds is high, but they have some inherent strengths in geographical reach and origination and servicing capabilities without incurring significant operating costs. Thus, the co-lending model enables both the partners to draw upon each other’s strengths to serve the unserved.
KVB has already tied up with Cholamandalam Investment & Finance Co Ltd, Axio, and IIFL Finance for co-lending business.
“We are in talks with 2 or 3 NBFC players and are hoping to finalise a co-lending pact with them in this quarter,” B Ramesh Babu, MD & CEO of KVB indicated during the bank’s Q1FY24 earnings call.
In a recent interaction, he said that under the co-lending partnership agreement, NBFCs would originate and process the loans based on mutually aligned credit parameters and eligibility criteria. KVB will fund 85 per cent of the loan generated by the co-lending pact while the remaining 15 per cent will be funded by NBFCs.
“Co-lending model helps KVB to use the network and expertise of the NBFCs. Today due to co-lending, we can expand our customer base and lend in geographies where we do not have branches and this being a digital lending model, we are able to scale up without involving any of the branches,” J Natarajan, President & Chief Operating Officer, KVB told businessline.
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