Edelweiss subsidiary ECL Finance has signed an agreement with major commercial lender, Central Bank of India, in a bid to expand SME lending by combining the former’s credit capabilities with the latter’s reach.

According to the announcement, CBI will significantly raise its lending profile through efficient risk mitigation while Edelweiss will gain access to «hard-to-reach markets in tier II and tier III cities». The partnership marks the first co-origination tie-up between CBI and a non-banking financial company (NBFC).

The partnership will include a range of products, including machinery and business loans. The use of fintech will further enable «robust underwriting for ordination, positively impacting the credit worthiness of micro, small and medium-sized enterprises (MSMEs)» in over 100 cities in India with competitive interest rates. 

Co-origination Model

One year ago, the Reserve Bank of India launched the framework for co-origination loans by banks and non-desposit taking NBFC. And as of recently, more banks are seeking to partner with NBFCs that have digital capabilities particularly to access the hard to access micro lending market.

«The Honorable Finance Minister announced slew of growth-oriented measures last Friday and had asked banks to implement co-origination platforms to extend financial support to MSMEs, who are the major contributor to exports, GDP and also generate large scale employment,» said Pallav Mohapatra, managing director and CEO of CBI.

«We believe that the co-origination model will enable easier access to credit under priority sector lending for the MSME segment.»