Synopsis
The co-lending model requires that the taking over bank shall ensure compliance with all the requirements of direct assignment guidelines except the Minimum Holding Period (MHP) requirement.
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Despite its multiple operational challenges, the direct assignment mode of co-lending has done justification in drawing a lot of confidence amongst the banks.
To provide the much-needed competitive edge for credit to the priority sector, the Reserve Bank (RBI) in 2018 had put in place a framework for co-origination of loans by banks and Non-Banking Financial Companies (NBFCs) for lending to the priority sector subject with certain conditions. The benefit of such a co-lending scheme was that the end borrower shall get loans at a very affordable and competitive rate because of the lower cost of funds from banks and greater reach of the NBFCs. Pursuant to the framework, both the lenders were supposed to approve a case before disbursement and jointly contribute to the expos