In September last year, the RBI issued norms for co-origination of priority sector loans by NBFCs and banks, with a view to increase flow of capital to the sector at competitive rates.
Private section lender ICICI Ltd Friday said that it has signed an agreement with Small Business FinCredit India to jointly provide funds to micro, small and medium enterprises (MSMEs), which are going through a liquidity crunch in the wake of GST implementation and demonetisation.
The agreement has been signed in line with the RBI’s circular in September last year, in which the central bank issued norms for co-origination of priority sector loans by NBFCs and banks, with a view to increase the flow of capital to the sector at competitive rates.
This is the first-of-its-kind pact between a bank and an NBFC in the country. Under the agreement, eligible MSMEs can get loans up to Rs 1 crore for a period of 15 years. The pact enables the private sector lender ICICI to co-originate loan against property with Small Business FinCredit at a mutually agreed ratio.
“This is a first of its kind lending arrangement between a bank and an NBFC that will enable a seamless flow of credit to MSMEs. With this initiative, we aim to support the entrepreneurial aspirations of customers who can contribute to the infrastructure growth story of the country,” said Ravi Narayanan, Head – Secured Assets, ICICI Bank.
According to the RBI’s September directive on co-origination of loans by NBFCs and banks to the priority sector in the country, lenders will independently assess the risks and requirements of the applicant borrowers. The agreement between banks, NBFCs and applicant borrower would be tripartite in nature, and both NBFC and the bank would be parties as lenders to the loan agreement with the customer.
“Through this, we will enable credit delivery to the micro- enterprises using technology, reach and deliver credit at the right price point that replaces market borrowings or trade credit and improves the cash flows of these businesses,” Aseem Dhru, MD & CEO, SBFC Pvt Ltd. said in the statement.
With over 90 branches spread across more than 60 cities and a staff of over 800 employees, Small Business FinCredit India has an equity of Rs 850 crores with Rs 1100 crores of Assets Under Management.