MUMBAI: Total assets under management through the co-lending model have touched Rs 1 lakh crore in the last five years, a domestic rating agency said on Monday.
However, the share of personal loans – which is the largest contributor to the co-lending model – is expected to decline as a result of regulatory restrictions on unsecured loans, the CRISIL Ratings report said.
It said personal loans currently account for one-third of the total AUM, and the growth of these loans is likely to be impacted due to the measures adopted by the RBI last year.
"While co-lending books will grow for all asset classes, the pace of personal loan growth is expected to be slower than in the recent past," the agency said.
Increasing the risk weight of unsecured consumer credit from 100 per cent to 125 per cent will reduce the growth rate of unsecured credit to 25-3 per cent in FY2015 from the estimated growth of 35 per cent in FY2014."With the recalibration in personal loan growth following the increase in risk weights, the share of personal loans in the co-lending book may decline, and MSME and home loans should increase," said Malvik Bhotika, its director.
In the medium term, the co-lending model will see a growth of 35-40 per cent due to higher interest in the avenue from both banks and non-restricted lenders.
Calling it a win-win model that allows sharing of risks and rewards, Ajit Veloni, senior director at the agency, said, “For NBFCs, especially mid-sized and smaller ones, this is a great opportunity for bank funding. "Enables access to funding as well as diversification of funding methods." ,
Additionally, NBFCs have the opportunity to grow in a capital efficient manner, while for banks, to meet priority sector credit requirements, access to specific customers and geographies is an attraction, Veloni said.Going forward, partners in such tie-ups may increase their focus on other asset classes such as loans to micro, small and medium enterprises (MSMEs) and home loans, given the higher risk weighting for personal loans, the agency said. Both currently contribute 13 percent and 20 percent to the AUM respectively.
The agency said, although maintaining asset quality will be key to the long-term success of the co-lending business model, the way regulations governing co-lending evolve will also remain under watch.
However, the share of personal loans – which is the largest contributor to the co-lending model – is expected to decline as a result of regulatory restrictions on unsecured loans, the CRISIL Ratings report said.
It said personal loans currently account for one-third of the total AUM, and the growth of these loans is likely to be impacted due to the measures adopted by the RBI last year.
"While co-lending books will grow for all asset classes, the pace of personal loan growth is expected to be slower than in the recent past," the agency said.
Increasing the risk weight of unsecured consumer credit from 100 per cent to 125 per cent will reduce the growth rate of unsecured credit to 25-3 per cent in FY2015 from the estimated growth of 35 per cent in FY2014."With the recalibration in personal loan growth following the increase in risk weights, the share of personal loans in the co-lending book may decline, and MSME and home loans should increase," said Malvik Bhotika, its director.
In the medium term, the co-lending model will see a growth of 35-40 per cent due to higher interest in the avenue from both banks and non-restricted lenders.
Calling it a win-win model that allows sharing of risks and rewards, Ajit Veloni, senior director at the agency, said, “For NBFCs, especially mid-sized and smaller ones, this is a great opportunity for bank funding. "Enables access to funding as well as diversification of funding methods." ,
Additionally, NBFCs have the opportunity to grow in a capital efficient manner, while for banks, to meet priority sector credit requirements, access to specific customers and geographies is an attraction, Veloni said.Going forward, partners in such tie-ups may increase their focus on other asset classes such as loans to micro, small and medium enterprises (MSMEs) and home loans, given the higher risk weighting for personal loans, the agency said. Both currently contribute 13 percent and 20 percent to the AUM respectively.
The agency said, although maintaining asset quality will be key to the long-term success of the co-lending business model, the way regulations governing co-lending evolve will also remain under watch.
