State Bank of India has entered into a co-lending agreement with U GRO Capital to offer financing solutions to the unserved and underserved MSMEs of the country in line with RBI guidelines.
Dinesh Khara, Chairman, SBI said, “This collaboration will further enhance our distribution network, as we aim to extend our credit reach to more MSMEs. Such partnerships align with our commitment to accelerate effective and affordable credit to MSMEs in India and contribute to the country’s financial inclusion imperative towards building an Atmanirbhar Bharat.”
RBI had issued guidelines on co-lending schemes for banks and NBFCs for Priority Sector Lending to improve the flow of credit to unserved and underserved sectors of the economy and to make funds available to borrowers at an affordable cost.
U GRO Capital reported an 80 per cent drop in its net profit for the second quarter of the fiscal at ₹3.37 crore compared to ₹17.17 crore in the same period last fiscal.
For the quarter ended September 30, 2021, its total revenue jumped up by 80.1 per cent to ₹62.7 crore from ₹34.82 crore a year ago.
Net interest income for the second quarter of the fiscal increased by 53 per cent to ₹31.7 crore compared to ₹20.7 crore in the second quarter of last fiscal.
Net interest margin improved 40 basis points Q-o-Q to 7.7 per cent largely due to reduction in the borrowing cost, U GRO Capital said in a statement on Wednesday.
However, total expenses also shot up by 80.1 per cent on a year-on-year basis to ₹57.98 crore in the second quarter of the fiscal.
The total provisioning as of September 2021 was ₹24.2 crore versus the regulatory requirement of ₹22.1 crore.
Disbursements for the quarter grew 139 per cent sequentially to ₹790 crore.
“The company clocked its highest ever disbursements in September 2021 at ₹288 crore,” it added.
“We will carry on the momentum and traction which is now coming because of the infrastructure we have built over last one year and we have a clear path of achieving our mission of serving 10 lakh customers and take one per cent market share of outstanding MSME credit in the country,” said Shachindra Nath, Executive Chairman and Managing Director of U GRO Capital.
U GRO Capital and Kinara Capital have entered into a strategic co-origination partnership to offer collateral-free business loans to small business entrepreneurs in India.
MSME funding
Together, both companies plan to disburse ₹100 crores by the end of FY22 to MSMEs in manufacturing, trading and services sectors, per a joint statement.
“Available financing for MSMEs will range from ₹1 lakh to ₹30 lakh with tenure ranging from 12–60 months.
“Financing can be availed for working capital and asset purchase directly from Kinara Capital, and women-led businesses receive an automatic, upfront discount with the HerVikas program,” according to the statement.
Fintech platforms
U GRO Capital, which aims to expand its branch network to 100 by FY22 (from 34 branches across 9 States now) and intends to reach 250,000 MSMEs in the next 4 financial years, is a listed (NSE, BSE) MSME lending fintech platform.
Kinara Capital, which has 110 branches across 6 States and has provided over 60,000 collateral-free loans to small business entrepreneurs, is a fintech supporting financial inclusion of small business entrepreneurs.
“The co-origination arrangement will leverage U GRO’s analytical data driven decisioning and integration through APIs with the smart technology platform of Kinara Capital,” the statement said.
Together, the two companies aim to ease access to formal credit for hundreds of small business entrepreneurs who need financing for business growth, it added.
Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital, said, “It is our belief that co-origination with fintech is one of the most effective routes to achieve the financial inclusion of MSMEs, which has prompted us to design our technology platform ‘Gro X-stream’ allowing essential collaborations like this to fructify.”
Under RBI’s model, banks can co-lend with all registered NBFCs, including housing finance companies.
The co-lending model has been around in the BFSI sector for some time now, but after the Reserve Bank of India issued guidelines in November 2020, co-lending has become a response to ease the liquidity crisis in non-bank lenders. The method aims to enhance credit flow to productive sectors, and banks and non-banking financial companies (NBFCs) have been increasingly exploring co-lending opportunities.
What is RBI‘s Co-Lending Model, and how will it work?
RBI’s CLM is one wherein two lender firms, in this case a bank and an NBFC, come together to disburse loans. Under RBI’s model, banks can co-lend with all registered NBFCs, including housing finance companies.
As per the guidelines, NBFCs and HFCs facilitate the origination and collection of housing loans while banks leverage their balance sheet strength to house the majority of the loan. This means that 80% of the loan will reflect in the bank’s balance sheet, while 20% in that of NBFCs or HFCs.
In simple terms, banks will lend to NBFCs, and NBFCs will pass it on to the priority sectors, since they have a greater reach.
NBFCs will be the single point of interface for the customers and enter into a loan agreement with the borrowers. The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.
The ultimate borrower would be charged an all-inclusive interest rate.
Considering the lower cost of funds from banks and greater reach of NBFCs, the primary focus is to improve credit flow to the unserved and underserved sectors of the economy, also known as priority sectors, and make funds available to the ultimate beneficiary at an affordable cost.
The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.
RBI has prescribed that a portion of bank lending should be used for developmental activities, for the priority sector, which includes agriculture, MSMEs, housing, and so on.
According to norms, both public and private sector banks have to lend 40% of their net bank credit (NBC) to the priority sector and foreign banks have to lend 32% of their NBC.
How is co-lending beneficial for lenders and borrowers?
The partnership allows banks to lend more funds to sectors and regions they do not have reach in. With the greater reach of NBFCs, the model allows banks to meet their total priority sector lending (PSL), while NBFCs get bigger and top rated borrowers on its books.
It also allows NBFCs to source clients, perform credit appraisals and disburse a small part of the loan amount, and enables banks to expand their lending business.
The end borrower gets accessibility to loans at very affordable and competitive rates, and is in turn included in the country’s financial ecosystem.
U GRO Capital, a digital first NBFC focused on MSME lending, aims to achieve assets under management (AUM) of ₹20,000 crore by 2025, its Chairman and Managing Director, Shachindra Nath, said.
This NBFC, already listed in the BSE, was added to the National Stock Exchange on Wednesday.
“The second wave of Covid-19 did impact us. However, we will still more than double our AUM this fiscal going by our current rate. Our aspiration is to take about 1 per cent market share of outstanding MSME credits in India by opening around 270 branches in the next few years,” Nath told BusinessLine.
The company had achieved an AUM of ₹1,561 crore as of July end this year, against ₹1,375 crore as of June 30, 2021 and ₹847 crore as of June 30 last year. U GRO Capital currently has 34 branches, and it aims to hit 100 by the end of FY’2021-22.
Cumulative disbursement has crossed ₹3,000 crore and monthly disbursal crossed ₹250 crore in July 2021.
U GRO Capital was instituted in the year 2017 by Shachindra Nath, with the buyout of Chokhani Securities Limited. This was followed by its recapitalisation and rebranding with a tech enabled business lending model. This company has raised about ₹920 crore of capital from a diversified set of institutional investors like private equity funds and family offices.
Partnership with SBI
Nath added that U GRO Capital will soon go live with its co-lending partnership with State Bank of India. “We are already live with our co-lending partnership with Bank of Baroda. We will soon go live with SBI and may also enter into a co-lending agreement with one more public sector bank this fiscal,” he said.
For the first quarter ended June 30, U GRO Capital recorded a profit after tax of ₹1.75 crore on a total income of ₹51.3 crore. The company had recorded a PAT of ₹1.55 crore on a total income of ₹48.7 crore in the previous quarter (Jan-March 2021). On a year-on-year basis, the company recorded a net profit of ₹3.73 crore on a total income of ₹30.78 crore in same quarter last fiscal.
Bank of Baroda and fintech platform U GRO Capital have launched a co-lending platform Pratham, under which ₹1,000 crore loan will be disbursed to the MSME sector in the country.
Commencements of loan disbursements under Pratham mark the 114th Foundation Day of Bank of Baroda, U GRO Capital — tech-focussed small business lending platform — said in a release on Wednesday.
“Pratham, a ₹1,000 crore co-lending programme, will allow the MSMEs to avail customised lending solutions at a competitive rate of interest with a significant reduction in turn-around time, it said.
The loan amount ranges from ₹50 lakh to ₹2.5 crore to be offered at an interest rate starting from 8 per cent with a maximum tenure of 120 months, it said.
“We believe that forging such partnerships is the way forward and collaborative efforts leveraging individual entities’ expertise are of utmost importance to take co-lending to MSME segment to the next level. This is a significant advancement in the same direction,” said Vikramaditya Singh Khichi, Executive Director, Bank of Baroda.
Support to MSMEs
The co-lending programme resonates with the bank’s intent to extend support to more micro, small and medium enterprises (MSMEs), he said.
The partnership with Bank of Baroda will enable the company to support more MSMEs in the remotest locations, and to help them revive and grow, Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital, said.
With technology and sectoral expertise, U GRO Capital will solve the unsolved credit needs of such small businesses, he said.
Pratham requires minimum documentation for loan, said the company.
Company’s proprietary developed platform GRO-Xstream allows faster turnaround time, with an in-principle approval issued within 60 minutes, U GRO Capital said.
U GRO Capital, a BSE listed, technology-enabled small business NBFC, today announced the launch of a co-lending partnership for micro, small and medium enterprises (MSME) with Bank of Baroda, one of the largest banks in India. Termed as ‘Pratham’, the loan disbursements have commenced on the occasion of Bank of Baroda’s 114th Foundation Day. The program has been launched under the Reserve Bank of India’s revised co-lending guidelines.
‘Pratham’, a ₹1000 crore co-lending program will allow the MSMEs to avail customized lending solutions at a competitive rate of interest with a significant reduction in turn-around time. The loan amount ranges from ₹ 50 lakh to ₹ 2.5 crores to be offered at an interest rate starting from 8% with a maximum tenure of 120 months.
Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital said, “It gives us immense pleasure to launch one of our most significant programs ‘Pratham’ and sign the co-lending agreement with Bank of Baroda under RBI’s revised guidelines. It is a reiteration of the value and trust that the bank places on our ability to leverage sectoral expertise and technology to solve the unsolved credit need of the MSMEs. We look forward to nurturing this essential relationship in our bid to support more MSMEs in the remotest locations, to help them revive and grow.”
Vikramaditya Singh Khichi, Executive Director, Bank of Barodasaid, “We are glad to have joined hands with U GRO Capital by way of this co-lending program, which resonates with our intent to extend support to more MSMEs. We believe that forging such partnerships is the way forward and collaborative efforts leveraging individual entities’ expertise are of utmost importance to take co-lending to the MSME segment to the next level. This is a significant advancement in the same direction.”
U GRO Capital on Wednesday announced the launch of a co-lending partnership for micro, small and medium enterprises with Bank of Baroda.
Called Pratham, it is under Reserve Bank of India’s revised co-lending guidelines.
It is a ₹1,000-crore co-lending programme that will allow MSMEs to avail customised lending solutions at a competitive rate of interest with a significant reduction in turn-around time, U GRO Capital said in a statement.
The loan amount ranges from ₹50 lakh to ₹2.5 crore and will be offered at an interest rate starting from 8 per cent with a maximum tenure of 120 months.
Accessible at nine locations
“We believe that forging such partnerships is the way forward and collaborative efforts leveraging individual entities’ expertise are of utmost importance to take co-lending to MSME segment to the next level,” said Vikramaditya Singh Khichi, Executive Director, Bank of Baroda.
MSMEs including the recently added wholesale and retail traders under priority sector can avail credit through this programme, which is accessible at nine locations.
“The partnership is a reiteration of the value and trust that the bank places on our ability to leverage sectoral expertise and technology to solve the unsolved credit need of the MSMEs,” said Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital.
U GRO Capital on Thursday announced its partnership with SBM Bank India for the launch of GRO Smart Business credit card.
Powered by RuPay, along with EnKash, these are a range of secured credit cards specially designed for under-banked micro, small and medium enterprises, it said in a statement.
These can be availed by U GRO Capital borrowers against a fixed deposit (FD) with SBM Bank India.
MSMEs eligible for the business loans from U GRO Capital would be extended incremental funds to open an FD account with SBM Bank and the credit card would be offered against the security of an FD maintained by the applicant in his name, it further said.
U GRO Capital has launched a dedicated distribution channel called GRO Micro to help lending services for the unorganised micro businesses in non-metro markets.
It has expanded its distribution network by adding 25 branches across five States — Karnataka, Tamil Nadu, Gujarat, Telangana and Rajasthan.
Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital, said the company aims to reach over five lakh small businesses across these five States through the launch of GRO Micro.
“We intend to carry our experience from these locations and expand our network by a further 75 branches by the end of 2021-22,” he further said.
Small-ticket loans
“The company aims to offer small-ticket loans secured against property, as well as unsecured loans, to micro businesses to help them in sustenance and stability in the post-pandemic era, meet their working capital needs to fix broken cash flows and cater to their business expansion needs,” it said in a statement.
With GRO Micro, U GRO Capital now has an extensive network of 34 branches and presence in eight States across the country.
