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Bank of Baroda to buy Rs 6,000 crore NBFC loans this quarter

The bank is set buy Rs 6,000 crore of NBFC loans through direct assignment route by the end of the ongoing quarter, a bank spokesperson said.

, ET Bureau|
Aug 27, 2019, 08.08 AM IST
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Mumbai: India’s second-largest public sector lender Bank of Baroda is set to make full use of government recommended mechanisms to extend credit support to the NBFC sector, which has been in a state of deep turmoil owing liquidity constraints for almost a year now.

The bank is set buy Rs 6,000 crore of NBFC loans through direct assignment route by the end of the ongoing quarter, a bank spokesperson said. The lender would avail benefits of partial credit guarantee scheme where a 10 per cent cover on defaults are provided by the government on those securitised portfolios which are rated AA and above and purchased within the stipulated six-month window.
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The scheme was introduced during union budget where PSBs have been asked to purchase Rs 1 lakh crore of NBFC loans in the hope that the fresh funds would help the non-banks improve their solvency arising due to mismatches in asset and liability tenures. Additionally, Bank of Baroda on Monday also announced that they are exploring tie up opportunities with 14 NBFCs such as Cholamandalam Finance, Indiabulls Housing Finance , Hero Fin Corp and Adani Capital to disburse loans under RBI’s co origination model. “We have already disbursed Rs 1,000 crore worth of loans under the co-origination model with two of our partner NBFCs. These loans are in retail and MSME portfolios,” said Papia Sengupta, ED, Bank of Baroda.

Under the co-origination scheme which was introduced by the Reserve Bank in August last year, the partnership dynamic between the two sets of lenders would be such that loans would be originated by NBFC with a minimum exposure of 20 per cent and banks would fund the rest of the loan with pre-agreed rates of lending by the two players.

“It’s a win-win situation for all the stakeholders involved. As a bank, we get to add new accounts, the customer has a lower interest rate option than loans served by other NBFCs, and the partner NBFC gets access to funds and can manage their ALM,” said Sengupta.

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