MMFSL shall act as the servicer and SBI as the escrow agent under the said agreement. The loans would be provided to eligible individuals/partnerships/ small and medium sized enterprises etc.
The co-lending arrangement is envisaged in a manner that risk and rewards shall be shared with mutual agreement between the two parties, subject to applicable regulatory framework.
The arrangement entails collections to be managed by MMFSL. SBI shall also pay certain service charges to MMFSL based on a pre-agreed formula and subject to certain terms and conditions.
MMFSL said that the rationale for the said agreement is "to improve the flow of credit to the unserved and underserved sector of the economy and make available funds to the ultimate beneficiary at an affordable cost, considering SBI's lower cost of funds from banks and MMFSL's greater reach in rural and semi-urban markets.
Mahindra & Mahindra Financial Services (Mahindra Finance), part of the Mahindra Group, is one of India's leading non-banking finance companies. Focused on the rural and semi-urban sector, the company has over 8.4 million customers and has an AUM of over $11 billion. The company is a leading vehicle and tractor financier, provides loans to SMEs and also offers fixed deposits.
The company's net profit surged 58.2% to Rs 352.66 crore on 25.09% jump in total income to Rs 3,125.41 crore in Q1 FY24 over Q1 FY23.
Shares of Mahindra Finance shed 0.55% to currently trade at Rs 290.60 while those of State Bank of India slipped 0.32% to Rs 571.05 on the BSE.
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