Vaibhav Pandey, Co-Founder, i2i Funding, said that, “Technology plays a vital role in the lending landscape, significantly expediting the decision-making process and ensuring swift approval and sanctioning for customers. It enhances the overall lending landscape by making the process faster and more efficient. Moreover, in the context of co-lending, technology addresses the intricacies involved in managing this collaborative process. Previously, a single bank or NBFC managed the entire customer journey, from application to onboarding and repayment, within a single application. However, with co-lending, two partnering entities fund a single loan, introducing a new level of flexibility. In fact, technology enables the possibility of having up to 10 co-lending partners funding a single loan, further expanding the options and opportunities available.”
He further added, “To provide an example, let’s consider a co-lending model where one partner funds 20% of the loan. In this case, both the bank and the NBFC (Non-Banking Financial Company) make independent realtime decisions through a co-origination process. While there may be an agreement on credit criteria, each partner independently determines their decision and conveys it in real-time. The joint loan agreement is signed accordingly. The bank and the NBFC may offer different interest rates, resulting in a blended rate that is ultimately passed on to the customer.”
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“In managing this co-lending arrangement, three separate ledgers are maintained for the same loan. Additionally, there may be varying risk-sharing arrangements, such as the bank or a major NBFC requesting a hurdle rate. When repayments are received, the first partner may receive the first portion (e.g., 30%) at the loan level or portfolio level, with the remaining portion going to the second partner. Managing all these processes manually would be impractical. Real-time and efficient systems are necessary, ensuring transparency between partners. Transparency is crucial in such risk-sharing associations, as all data needs to be readily available to both partners to facilitate scalability and success of the entire co-lending model, he added.
