Mumbai: IIFL Housing Finance is looking at a co-lending partnership with banks to grow its home loan business. The private lender has partnered with Standard Chartered Bank and Central Bank and is currently in advanced talks with another public sector bank.

The housing finance company, which has a loan book that is around 46% of IIFL’s loans, has developed expertise in lending for affordable housing, which now serves as a competitive advantage.

Speaking to TOI, Monu Ratra, CEO, IIFLHF said that while for PSU banks home loan continues to be a branch-led portfolio, his company through the use of technology and productive field staff has been able to digitise and make the customer onboarding process efficient.

“Once you do a lot of transactions, to keep yourself cost-efficient you need a lot of innovation. We do not use external software. We have a 100-member team in-house to develop our applications, which enables us to customise much faster. A lot of effort has gone into this and over time this investment has created a moat for us,” said Ratra.

To digitise the process, IIFLHF has partnered with several fintechs including for support on the KYC process, to read the text in documents using OCR (optical character recognition) and other tasks. This digital infrastructure enables HFCs to deploy agents with electronic tablets to onboard customers. The company can also expand its office network without significantly pushing up its operating expenses.

Ratra points out that public sector banks are ideal partners as other than SBI there is no other PSB with a loan portfolio of over Rs 1 lakh crore. At the same time, demand in the affordable segment has increased even as this niche industry has seen some consolidation.

“Banks realise that they cannot customise systems for one segment of this market. This is why they would want to partner someone like us to do this business,” said Ratra. The Reserve Bank of India had permitted co-lending three years ago to provide borrowers with the advantage of the low cost of funds of banks and the efficiency of finance companies.

Despite its average loan size being only around Rs 18.5 lakh, IIFLHF has managed to contain its customer acquisition cost at 1.5%.

Under RBI’s co-lending model, the housing finance company will be the single point interface for the customer, but the loan would be shared between the bank and NBFC. Banks can participate in the loan up to 80% and pay the housing finance company a fee for procuring the loan.