Finance Ministry asks SBI to form committee to tackle co-lending issues

The Finance Ministry has asked the State Bank of India (SBI) to set up a committee to address issues related to the co-lending business model, said a senior government official who does not wish to be named.

The Reserve Bank of India had allowed banks to co-lend or co-originate loans with non-banking finance companies, including housing finance companies, to enhance the flow of credit to the unserved and underserved sections of the economy. Non-banking finance companies can take a maximum of 20 per cent, according to the norms.

We've identified some co-lending issues and thus asked SBI to form a committee. This committee will include representatives from major banks and non-banking financial services," said the official.

Regarding the Reserve Bank of India's draft project financing norms, the official said, "All stakeholders will provide their feedback, which will be consolidated and submitted to the government. The Department of Financial Services will also comment on the draft norms."

The recent draft guidelines by the banking regulator propose a phased 5 per cent standard asset provision during the construction phase, even for existing projects.

The Finance Minintry has also expressed concerns about the high lending rates of non-banking financial companies. "We've addressed the issue of high interest rates with non-banking financial companies and directed them to improve their recovery process," said the government official.