ECL Finance Limited, a subsidiary of Edelweiss Financial Services Limited and State Bank of India (SBI), India’s largest bank, 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 tier III markets to ensure timely disbursal of credit to MSMEs.
This collaboration involves the sharing of risks and rewards between Banks and NBFCs and is a win-win for all involved parties; MSME customers, Banks and Edelweiss, creating a lending environment that truly democratizes 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 specialized 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 of the Indian economy. Edelweiss and SBI are collaborating to make reasonably priced credit accessible for the priority sector segment.’’
Speaking on the announcement, Mr. P. K. Gupta, Managing Director – Retail & Digital Banking, SBI said, “The partnership will boost 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.”
Mr. Deepak Mittal, MD & CEO, ECL Finance added, “This collaboration will help both SBI and Edelweiss leverage their respective strengths on customer acquisition, credit assessment and state-of-art technology, to bring down cost of credit for the MSME sector substantially. Having recently won the Best NBFC in SME Finance award, at the India NBFC Summit, this unique tie up is further testament of Edelweiss’ abilities in acquiring high-quality customers and due diligence of credit assessment.”
The Credit business has been a significant growth engine for the Edelweiss Group because of its size, scalability and a growing presence pan India. The retail segment accounts for 50 per cent of the credit business. This is the third Co-Origination MoU in quick succession for Edelweiss, after Bank of Baroda and Central Bank of India.
In recent years, the Edelweiss Group has cemented several partnerships with leading global institutions including Caisse de depot et placement du Quebec (One of North America’s largest pension funds), Allianz Investment Management (Part of the Allianz Group, one of the world’s largest insurers), Bank of Singapore and Arthur J Gallagher across market leading platforms, in ECL Finance, Private Debt, Wealth Management and Insurance Broking businesses respectively. Most recently, Edelweiss announced an investment of US$ 75 million (~INR 525 crores), by US-based major Kora Management in Edelweiss Global Investment Advisors (EGIA), subject to structuring-related milestones. A total investment of $ 200 million is expected in the advisory business, including the investment from Kora Management.