Arka Fincap explores co-lending partnerships with three PSU lenders

The company may also explore initial public offering (IPO) in next two to three years after the AUM of the company exceeds Rs 10,000 crore.

Non-banking finance company Arka Fincap, which specialises in SME and MSME lending, may tie-up with at least three state-owned banks for co-lending after partnering with Central Bank of India, people familiar with the matter told moneycontrol.

Talks are on with three large public sector banks that could include Indian Bank, State Bank of India, and Indian Overseas Bank. The discussion with these banks is in advanced stages and may conclude in the next two months or so, the people cited above said.

Co-lending refers to partnerships between two lenders, typically a bank and a non-bank to offer loans to different segments.

As a test case to co-lending model, Arka Capital has entered into an arrangement with a few of the banks they are in talks with to sell-down some loan assets.

On July 17, Arka Fincap partnered with Central Bank of India under a co-lending arrangement and through this partnership, Arka will offer loans to MSMEs at competitive rates, further expand their reach across India and continue to offer convenience and a delightful experience to their customers.

As part of the collaboration, Arka will originate and process loan proposals under MSME sector as per jointly formulated credit parameters and Central Bank of India will take into its books 80 percent of the MSME loans under mutually agreed terms.

Arka will service the accounts throughout the life cycle of the loans.

The company in the first quarter of the current financial year is expected to report assets under management (AUM) worth Rs 5,600 crore.

By the end of financial year 2023-24, company's AUM stood at Rs 5,211 crore, compared to Rs 3,960 crore in a year-ago period.

Total income of the company stood at Rs 570.8 crore by FY24-end, which was sharply higher than Rs 372.9 crore in a year ago period.

The company may also explore initial public offering (IPO) in next two to three years after the AUM of the company exceeds Rs 10,000 crore.