Mumbai: State Bank of India on Monday said it will adopt repo rate as the external benchmark for all floating rate loans for MSME, home and retail loans, from 1 October 2019.
On 4 September, the Reserve Bank of India (RBI) had mandated all banks to link all new floating rate personal or retail loans and floating rate loans to micro, small and medium enterprises (MSMEs) to an external benchmark from 1 October onwards. “We have decided to adopt repo rate as the external benchmark for all floating rate loans for MSME, housing and retail loans effective 1 October 2019,” the bank said in a release.
The RBI gave the banks options to benchmark their floating rate loans either to repo rate, three-month or six-month treasury bills or any benchmark market interest rate published by Financial Benchmarks India Private (FBIL). The bank has also extended the external benchmark-based lending to medium enterprises, to boost lending to the MSME sector as a whole. It had introduced floating rate home loans effective 1 July 2019, but has made some modifications in the scheme effective 1 October 2019, to comply with the latest regulatory guidelines, the release said.
Co-lending model soon
SBI is expected to launch a co-lending business model soon with 4-5 medium to large-sized NBFCs, an official of the lender said. Once the present hurdles relating to the integration of technology with the non-banking finance companies (NBFCs) are removed, the model of co-lending will be launched and it will be completely automated without manual intervention from on-boarding of customers to loan disbursement and monitoring, the SBI official said.
Under the co-lending model, the bank will have an exposure between 70 and 80 per cent while the rest will be borne by the NBFCs but this arrangement will be “only” for the priority sector lending, he said. “We are close to launch co-lending financing model with NBFCs in line with the Reserve Bank of India guidelines. We will tie-up with 4-5 medium to large-sized NBFCs and it would be finalised in 30-40 days,” SBI deputy managing director Sujit KumarVarma said. It has been a year since the Reserve Bank of India (RBI) laid out the framework for co-origination of loans by banks and NBFCs in the priority sector.
Co-origination is a new system introduced by the RBI in the wake of the liquidity crisis at non-banking finance companies to enhance the credit flow to productive sectors. The designated officials are looking at the tie-ups with NBFCs and the lender is weighing whether the NBFCs have a robust business model and technology , he said. “Entire process of co-lending business model will be automated taking from business proposal to disbursement and tracking of the account. Now, integration of technology of both the bank and NBFCs is underway,” Varma said. He said the co-lending model would help the bank to meet the priority sector lending target. ‘