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Co - Lending Mechanism
IIFL Home Finance Ltd. (IIFL HFL), in compliance with RBI circular no. RBI/2020-21/63 FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 05, 2020 is adopting the following policy on Co-lending of loans.
- Co-origination of loan with Scheduled Commercial Banks only, excluding foreign banks (including WOS) with less than 20 branches
- Lending to be made only to priority sector defined by RBI which shall include for funding towards micro, small & medium enterprises, export credit, education, housing, social infrastructure, renewable energy, startups etc
- A Master Agreement shall be entered into between IIFL HFL and the partner institutions which shall inter-alia include, terms and conditions of the arrangement, the specific product lines and areas of operation, along with provisions related to segregation of responsibilities as well as customer interface and protection issues
- The Master Agreement may provide for the banks to either mandatorily take their share of the individual loans, originated by IIFL HFL, in their books as per the terms of the agreement, or to retain the discretion to reject certain loans after their due diligence prior to taking in their books
- The co-lending banks will take their share of the individual loans on a back-to-back basis in their books
- IIFL HFL shall retain a minimum of 20 per cent share of the individual loans on its books; the percentage of retention by IIFL HFL in all cases shall be guided by the terms of agreement between IIFL HFL and its lender
In accordance with IIFL’s credit norms, once a client has agreed to commercial terms, evaluation is done based on various parameters like:
The above terms shall be defined on finer lines under the co-lending credit norms to be mutually agreed with the bank. For all the cases sourced IIFL HFL shall abide by said norms.
- Past history of borrowing with the co-lenders as well as other lenders (if any), Various credit checks viz. bureau, internal dedupe, and fraud check, Basic KYC documents like Aadhaar Card, PAN, Voter ID etc
- Assessment of income, business vintage, and stability
Approval norms:
IIFL HFL shall not outsource credit decision process. Further, it shall ensure to seek approval from partnering bank via ex-ante due diligence by the bank in all cases where the master agreement entails a prior, irrevocable commitment on the part of the bank to take into its books its share of the individual loans as originated by the IIFL HFL If the bank can exercise its discretion regarding taking into its books the loans originated by IIFL HFL as per the Agreement, the arrangement will be akin to a direct assignment transaction with the exception of Minimum Holding Period (MHP) which shall not be applicable in such transactions undertaken in terms of this CLM. The MHP exemption shall be available only in cases where the prior agreement between the banks and NBFCs contains a back-to-back basis clause and complies with all other conditions stipulated in the guidelines for direct assignment.
Interest Rate:
- IIFL HFL and the partnering bank shall have the flexibility of pricing their part of exposure in accordance with internal pricing strategies, however, the ultimate borrower shall be charged an all-inclusive interest rate
- Upon repayment, the interest shall be shared between IIFL and the bank in proportion to their share of credit and interest
Other Operational Aspects:
- The framework for monitoring and recovery of the loan, shall be guided as per mutually agreed terms
- IIFL HFL along with partnering bank, depending on terms of agreement, shall arrange for creation of security and charge as per mutually agreeable terms
- IIFL HFL shall adhere to the asset classification and provisioning requirement including reporting to Credit Information Companies, for its share of the loan account
- The loans under the CLM shall be included in the scope of internal/statutory audit to ensure adherence to our internal guidelines, terms of the agreement and extant regulatory requirements
- Any assignment of a loan by IIFL HFL to a third party can be done only with the consent of the partnering bank
- IIFL HFL shall ensure uninterrupted service to their borrowers, on-boarded under the current CLM, till repayment of the loans even in the event of termination of co-lending arrangement between the co-lenders
- The framework for monitoring and recovery of the loan, shall be guided as per mutually agreed terms
Provisioning:
- In event of default, provisions shall be provided in books for the mentioned loan (IIFL part) as per IIFL’s board approved policy. Any additional provisions shall be made on case-to-case basis
Customer related issues:
- The IIFL HFL shall be the single point of interface for the customers and shall enter into a loan agreement with the borrower, which shall clearly contain the features of the arrangement and the roles and responsibilities of IIFL HFL and banks
- All the details of the arrangement shall be disclosed to the customers upfront and their explicit consent shall be taken
- The extant guidelines relating to customer service and fair practices code and the obligations enjoined upon the banks and IIFL HFL therein shall be applicable mutatis mutandis in respect of loans given under the arrangement
- The IIFL HFL should be able to generate a single unified statement of the customer, through appropriate information sharing arrangements with the bank
- With regard to grievance redressal, suitable arrangement must be put in place by the co-lenders to resolve any complaint registered by a borrower with the IIFL HFL within 30 days, failing which the borrower would have the option to escalate the same with the concerned Banking Ombudsman/Ombudsman for NBFCs or the Customer Education and Protection Cell (CEPC) in RBI.