Under a typical co-lending setup, multiple lenders collaborate to extend loans, facilitating broader customer reach for banks and access to cheaper funds for NBFCs, along with a share in the loan portfolio.
GST on NBFC Co-Lending: The government, spearheaded by Vivek Joshi, is set to tackle concerns regarding the imposition of Goods and Services Tax (GST) on co-lending arrangements between non-banking financial companies and banks. This move comes in response to raised issues of distortion and potential hikes in lending costs.
In a recent meeting involving banks, tax authorities, industry bodies like FIDC and MFIN, as well as partner banks, the growth of the co-lending model was extensively discussed. Notably, NBFCs’ loan books are anticipated to soar to ₹1 lakh crore, reflecting the substantial interest in this lending approach.
During the meeting, representatives from banks and Non-Banking Financial Companies highlighted the adverse impact of GST notices served by tax authorities, expressing concerns over potential distortions and increased lending expenses. The industry contends that co-lending should not be subjected to GST as it does not constitute a service.
Chaired by Vivek Joshi of the Department of Financial Services, the meeting assured stakeholders that the government would closely examine the matter. The Finance Industry Development Council (FIDC) had previously sought clarity on the GST issue of NBFC co-lending.
Under a typical co-lending setup, multiple lenders collaborate to extend loans, facilitating broader customer reach for banks and access to cheaper funds for Non-Banking Financial Companies, along with a share in the loan portfolio. CRISIL’s recent report indicates a significant uptick in NBFCs’ co-lending portfolios, expected to hit ₹1 lakh crore by June 2024, driven by heightened interest from partner banks.
The government’s commitment to addressing GST concerns underscores its proactive stance in fostering a conducive lending environment while ensuring regulatory clarity for financial institutions.
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