Edelweiss and SBI team up for co-origination of loans to MSMEs

ECL Finance Limited, a subsidiary of Edelweiss Financial Services Limited, and India’s largest bank State Bank of India (SBI), have signed a co-origination agreement to increase access to credit for Micro, Small and Medium Enterprises (MSMEs). 

Pursuant to Reserve Bank of India’s (RBI) guidelines on co-origination of loans by banks and NBFCs, the alliance aims to leverage combined reach in Tier II and III markets to ensure timely disbursal of credit to MSMEs. 

This collaboration involves the sharing of risks and rewards between Banks and NBFCs, MSME customers, Banks and Edelweiss, creating a lending environment that truly democratises credit flows to an important socio-economic segment. 

The partnership between SBI and Edelweiss comes close on the heels of SBI setting up a special NBFC Alliance department to step up lending to the priority sector.

For Edelweiss, co-origination represents an alternate model of disbursals that is asset-light and creates a sound revenue model through fee income. SBI brings capital flows at low costs, which when combined with Edelweiss’ expertise, would be able to meet the credit needs of MSME customers.

For MSME customers, this translates into easy access to credit at lower rates, given a specialised blended rate of interest.

Speaking on the development, Rashesh Shah, Chairman & CEO of Edelweiss Group, said,

We are delighted to partner with the prestigious State Bank of India and be a part of this priority sector lending initiative for MSMEs. We believe that revival is possible only by making credit available to this vital contributor to the Indian economy. Edelweiss and SBI are collaborating to make reasonably priced credit accessible for the priority sector segment.’’

PK Gupta, Managing Director, Retail & Digital Banking, SBI, said, “The partnership will boost the credit availability to the MSME community, which contributes substantially to the GDP. The wide reach of SBI will give access to cost-effective loans to the MSME sector in non-metros.”    

Earlier this week, Edelweiss Financial Services and Central Bank of India also signed an agreement for priority sector lending to MSMEs. The partnership aims to facilitate speedy disbursal of credit across a bouquet of products, including machinery and business loans.

Co-origination is a new system introduced by the Reserve Bank of India (RBI) in the wake of the liquidity crisis at non-banking finance companies (NBFCs) to enhance credit flow to productive sectors. Fresh credit flow can help both the troubled NBFCs and also help prop up the sagging growth.

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