The partnership between ECL and SBI looks to leverage their combined reach in tier II and tier III markets for timely disbursal of credit to MSMEs.
Financial services firm Edelweiss Financial Services’ subsidiary ECL Finance and India’s largest bank — State Bank of India (SBI) have come together to boost credit access to MSMEs through a ‘co-origination’ agreement announced on Thursday. Co-origination model was announced by the Reserve Bank of India (RBI) in September last year between banks and non-banking financial companies (NBFC) according to which all scheduled commercial banks except small finance banks and regional rural banks may partner with NBFCs non-deposit taking-systemically important (NBFC-ND-SIs) to co-originate loans for the creation of priority sector assets, as Financial Express had reported last year.
Enterprises will have access to business loans, machinery loans and SME asset-backed loans between Rs 3 lacs and Rs 50 lacs. The partnership between ECL and SBI looks to leverage their combined reach in tier II and tier III markets for timely disbursal of credit to MSMEs. This would involve risk and reward sharing between banks and NBFCs and is a “win-win for all involved parties; MSME customers, Banks and Edelweiss,” Edelweiss said in a statement as it democratizes credit flows to the socio-economic segment.
MSMEs, for which credit access remains a key challenge, and has been seeing a downturn will see a revival “possible only by making credit available to this vital contributor of the Indian economy,” said Rashesh Shah, Chairman & CEO of Edelweiss Group. The co-origination is an alternate model for Edelweiss for disbursals that are asset-light as well as a good revenue source through fee income. MSMEs would be able to access credit easily at a lower rate given “a specialized blended rate of interest,” the statement said. The tie-up with SBI is the third such co-origination deal for Edelweiss, after Bank of Baroda and Central Bank of India.
The credit business contributes significant growth for Edelweiss with the retail segment accounting for 50 per cent of the credit business. The group has partnered with multiple organisations globally in recent years including Caisse de depot et placement du Quebec (among North America’s largest pension funds), Allianz Investment Management, Bank of Singapore and Arthur J Gallagher in ECL Finance, private debt, wealth management and insurance broking businesses respectively.