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Background
Si Creva Capital Services Private Limited is a private limited company incorporated under the provisions of the Companies Act, 2013 having Corporate Identification Number (CIN) U65923MH2015PTC266425 (“Si Creva”/”Company”). Si Creva is a Middle Layer Non-Deposit taking Non-Banking Financial Company registered and regulated by the Reserve Bank of India (“RBI”) as a Non-Banking Finance Company (“NBFC”), bearing Registration no. N-13.02129.
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Preamble
The Reserve Bank of India circular FIDD.CO.Plan.BC.08/04.09.01/2018-19 dated September 21, 2018 on co-origination of loans by banks and NBFCs for lending to the priority sector. The arrangement entailed joint contribution of credit at the facility level by both the lenders as also sharing of risks and rewards.
In terms of the Reserve Bank of India circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 05, 2020, commerical banks are permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement. The co-lending banks will take their share of the individual loans on a back-to-back basis in their books. However, NBFCs shall be required to retain a minimum of 20 percent share of the individual loans on their books.
It is understood that taking the aforementioned concept forward, the arrangement of co-lending can also be considered between two registered NBFCs also which are classified in the category of ICC, on the same basic principles of taking their share of the individual loans on a back-to-back basis in their books subject, however, to the fact that there has to be prudent credit risk sharing model. It needs to be taken care that the arrangement should not result in any on-tap DA transaction, which otherwise entails the requirement of MHP and MRR.
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Objectives
The Company proposes to engage with eligible banks, financial Institutions and NBFCs (“Lenders”) for exploring co-lending opportunities across its existing and new products/segments which qualify as per the circular and the principles laid down thereunder. In particular, the lending bank / NBFC shall have to put in place suitable mechanisms for ex-ante due diligence by the partner NBFC as the credit sanction process cannot be outsourced under the extant guidelines.
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Engagement Model with Lenders under co-lending
The arrangement would entail a joint contribution of credit at the facility level, by both the Company and the Lenders. The co-lending parties shall maintain each individual borrower’s account for their respective exposures. However, all transactions (disbursements/ repayments) between the co-lending parties shall be routed through an escrow account maintained with the banks, in order to avoid intermingling of funds.
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Geographical Scope
Si Creva is proposing to explore co-lending opportunities across the Company’s network through its partnership with other NBFCs/MFIs/HFCs.
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Sharing of Risk and rewards
The sharing of risks and rewards is contingent upon adherence to the prescribed and permitted RBI guidelines. Any additional risks that may arise will be governed by the co-lending master agreement with respective lenders and it will be distributed in the agreed-upon manner.
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Commercials:
- Interest rate – The ultimate borrower may be charged an all-inclusive interest rate as may be agreed upon by both the lenders conforming to the extant guidelines applicable to both.
- Fees and Expense sharing for other activities – Appropriation between the co-lenders may be mutually decided basis mutual agreement with Lenders.
- AUM / Servicing Fees / Any other commercial terms – Would be agreed mutually with Lenders.
- Standard Operating Process – A detailed Standard Operating Process (“SOP”) would be created in discussion with the partner Lenders following the co-lending Master Agreement being entered into, to suitably detail the Credit Appraisal process within the SOP with provision for ex-ante due diligence by the co-lender, establishing a framework for monitoring and recovery of the loan, method of handling the transactions of disbursement / recovery so as to avoid co-mingling of funds, arranging for creation of security and charge, prior consent of the other lender for assignment of a loan by a co-lender to a third party, etc.
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Know Your Customer (KYC):
The co-lending institutions shall adhere to applicable KYC/ AML guidelines, as prescribed by RBI and any other regulation as stipulated by RBI from time to time. Both the originating NBFC and the lending partner, being the regulated entities, at their option, may rely on customer due diligence done by a third party, subject to conditions, specified by RBI in the Master Directions on KYC Norms.
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Customer Service & Grievance Redressal:
It shall be the responsibility of the Company to explain and disclose to end borrower regarding the difference between products offered through the co-lending model as compared to its own products. The front-ending lender will be primarily responsible for providing the required customer service and grievance redressal to the borrower. With regard to grievance redressal, any complaint registered by a borrower with the NBFC/ Lender shall also be shared with other Lender/ NBFC; in case the complaint is not resolved within 30 days, the borrower would have the option to escalate the same with the concerned Lender’s Ombudsman/ RBI’s Ombudsman for NBFCs.
Both the lending partners shall ensure adherence to RBI directives relating to (i) sharing of all details of the arrangement for explicit consent of the end borrower, (ii) generation of a single unified statement of the customer, and (iii) single point interface for the customer.
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Business Continuity Plan:
Notwithstanding the termination of the co-lending Master Agreement, both Lenders agree and acknowledge that the Borrower’s servicing shall be rendered till each loan originated under the colending agreement is completely repaid or settled as detailed in the SOP.
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Other Policies & Guidelines:
The Company will ensure that it adheres to the regulations prescribed by the RBI/any other relevant regulatory body and the Company’s policies for any loan that has been disbursed through the colending model in the same manner as would have been the case if the entire loan were being disbursed solely on the behest of the Company.
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Review of the Policy
The co-lending Policy shall be subject to periodic review in accordance with any regulatory or statutory requirement and shall be approved by the Board of the Company.
The compliance and the execution/negotiation/finalization of the co-lending arrangement will be the responsibility of the finance committee. The Board will be reviewing the co-lending tie-up along with its performance at regular intervals.
