The changed strategy follows a risk-free program following the IL&FS crisis.
Nirmal Jain, Founder and Managing Director, IIFL Finance said, “IIFL Finance has transformed its business model from a pure non-bank lender to a co-lending partner with banks.
“IIFL Finance has benefited from the co-lending model, where it keeps only one-fifth of the loan on its books and four-fifths goes to the bank’s books,” he told ET.
IIFL Finance continues co-lending partnership with banks including central bank of indiaDCB, Union Bank of Indiadbs, Canara BankShivalik Bank and Indian Bank For products such as loans for homes, gold, business purposes and microfinance.
Large public sector banks are expected to sign a co-loan deal for which IIFL Finance could be a partner for a major part.
“Several new partnerships, including the largest public sector banks such as” State Bank Of India, Punjab National Bankare in the works,” Jain said.
“IIFL is confident of further accelerating its co-loan program and tripling it in the next one year,” he added.
IIFL Finance has been able to grow the co-lending book by 22% to over Rs 4500 crore in the last quarter itself. The growth is over 1800% on a year-on-year basis.
Co-lending occurs when two lenders come together with banks to offer loans primarily to borrowers.
This practice was started in India about a decade ago. For non-banks, it helps in mobilizing resources and creating less risky customers. It helps banks to extend credit faster.
IIFL Finance has a combined debt of around Rs 55,300 crore. Individual customers from smaller cities and towns mostly borrow from IIFL Finance.
“IIFL Finance has emerged as the largest co-lending player for retail loans with a network of 3600 branches and a track record of 15 years in retail lending,” Jain said.
There are about 32,000 people working in the branch network.
Banks look for partners with a wide network of branches and their own manpower who are experienced in credit under-writing, collection and loan origination,” said Jain.
Despite the huge growth in the banking network since the seven decades of independence, millions of small businesses and households in India do not have access to credit from banks. Most small businesses and individuals require loans ranging from Rs. 20,000 to 2 lakhs, for which the bank’s conventional method of processing and underwriting credit makes it unviable.
According to Jain, the key requirement is to help these millions of small businesses grow and provide loans to low-income families for their emergency cash needs.
“The best way to achieve this is with the co-lending model.”