The co-lending Model (CLM) of credit is not new to the Indian finance sector. Due to the proliferation of fintech resources and capabilities, the CLM has gained a lot of significance and has emerged as a viable solution to liquidity and access to credit issues. Efficient co-lending Loan Management Systems (LMS) can leverage the inherent capabilities of this lending model and create a win-win situation for all the stakeholders, including banks, NBFCS, and borrowers.
Finezza presents a robust and agile Loan Management System (LMS) that caters to the unique requirements of the co-lending model. We understand the operational, regulatory, and technological prerequisites needed for the functioning of CLM. Our in-depth expertise has integrated these functionalities into our LMS to provide comprehensive and seamless loan lifecycle management. Finezza’s co-lending LMS simplifies complex co-lending procedures and offers numerous competitive advantages.
How Our LMS Enhances the Efficiency of Lending Operations
Co-lending works on the proportionate sharing of risks and rewards of loans between the banks and the NBFCs. This presents challenges in underwriting, loan processing, sharing of interest and charges collected, apportioning costs and risks of loan defaults, etc. The process becomes especially complex when NBFCs have multiple co-lending partners. Implementing these operational intricacies must not trouble the customers in any way. The borrower must interact solely and directly with the lending facilitator (NBFC) throughout the loan lifecycle. Our co-lending compatible LMS takes care of each of these functionalities in the most effective manner.
- Simplifies Sharing of the Cost of Funds– The cost and the proportion of funds contributed by each lending partner vary in a co-lending arrangement, and the cost of funds will be higher for NBFCs compared to the banks. According to the RBI guidelines, NBFCs have to contribute 20% of the loans while the banks contribute 80% of the funding. As the repayment starts, calculating the proportionate share of interests, fees, charges, penal interests, etc., from the monthly EMIs becomes challenging. Our platform accurately handles such complex computations.
- Provides only Pertinent Reports to the Stakeholders– Our co-lending LMS provides customised Management Information Systems (MIS) for each participant in the arrangement. The platform creates three views of the loan- 100% for the customer, 80% for the bank, and 20% for the NBFCs, giving these parties a clear view of their stake.
- Automates the Key Facts Statement for Loans– Finezza’s co-lending LMS automatically generates the mandatory Key Facts Statement (KFS). The KFS contains information, such as the terms, conditions, and participants of the loan, that the lenders must share with the borrower.
- Undertakes Regulatory Reporting to Credit Bureaus– In the co-lending model, each lending participant is responsible for the proportional reporting of loans, based on their share, to credit bureaus. Our co-lending LMS effortlessly takes care of this operational hassle.
- Streamlines Bookkeeping– Our co-lending LMS platform automates bookkeeping for the lending participants in this complex lending model. It can generate ledger and trial balances aligned with each lending partner’s loan share. At any given time, the bank and the NBFC will know how much the latter owes the former.
Parting Notes
Co-lending presents a huge business opportunity for banks and NBFCs. They can overcome their constraints and capitalise on their synergies to provide funds to many credit underserved customers in the Indian market. This business model’s success depends on the technical competence of your co-lending LMS. Finezza’s Co-lending Loan Management System removes operational inefficiencies and helps scale your lending operations. Contact us today to learn more about how our Loan Management System enhances the co-lending process.
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