Paisalo Digital (NSE: PAISALO, BSE: 532900) expands co-lending deal with SBI to include SME products

Paisalo Digital Limited has signed a new co-lending loan agreement with the State Bank of India for SME products, marking a strategic extension of their long-running joint lending platform. This agreement aims to enhance formal credit access for small businesses, especially in underserved tier 2 and tier 3 cities, as well as rural and semi-urban regions across India.

The systemically important non-deposit-taking non-banking financial company (NBFC), registered with the Reserve Bank of India, formally notified the Bombay Stock Exchange and National Stock Exchange of the development on June 27, 2025. The updated arrangement builds on the original digital co-lending platform launched between Paisalo Digital and the State Bank of India in 2021, which focused primarily on micro-enterprise loans. By bringing SME loans into the fold, the two entities are aiming to address a significant gap in India’s formal credit infrastructure for the small business segment.

How does the Paisalo–SBI co-lending expansion align with RBI priorities and past credit ecosystem reforms?

This co-lending arrangement directly aligns with the Reserve Bank of India’s co-lending model guidelines issued on November 5, 2020, which encourage collaboration between banks and NBFCs to expand credit reach in priority sectors. The updated framework allows NBFCs like Paisalo Digital to originate loans under a unified platform, while banks like the State Bank of India fund a substantial portion of the disbursal, lowering the blended cost of credit.

The co-lending model (formerly known as co-origination) has grown in institutional relevance over the past four years. Regulatory reforms have created structured mechanisms for underwriting, KYC validation, and recovery through shared technology platforms. By aligning this SME loan expansion with RBI-backed frameworks, the partnership is effectively utilizing regulatory headroom to push formal lending deeper into the small enterprise sector.

What is the strategic rationale for targeting SME borrowers in semi-urban and rural markets through this model?

The inclusion of SME loan products reflects both unmet credit demand and the evolution of Paisalo Digital’s borrower profile. India’s small and medium enterprises contribute over 30% of the country’s GDP but continue to face a credit gap exceeding INR 25 lakh crore, according to past industry estimates. In many non-metro regions, SME operators remain excluded from traditional bank lending due to thin file risks, low credit scores, or inconsistent financial documentation.

By combining Paisalo Digital’s localized presence—currently spread across more than 3,565 physical touchpoints—with SBI’s robust underwriting systems and funding capacity, the co-lending platform offers a tailored solution. The digital backend ensures efficiency in origination, disbursal, and recovery, while the front-end physical outreach builds trust and accessibility among small borrowers.

Deputy Managing Director of Paisalo Digital Limited, Santanu Agarwal, indirectly highlighted this synergy, noting that the partnership is designed to scale entrepreneurship, employment, and inclusive financial access. Analysts interpret this extension as a deliberate pivot towards higher-ticket loans with relatively more structured cash flow profiles than microloans.

What operational strengths differentiate the SBI–Paisalo platform in the Indian co-lending landscape?

The SBI–Paisalo co-lending platform is an end-to-end digital system that handles origination, credit appraisal, approval, disbursal, servicing, and collections—all under a unified framework. Unlike fragmented NBFC–bank arrangements in other partnerships, this model leverages Paisalo Digital’s real-time borrower profiling and geo-tagged field activity to create a high-transparency pipeline for loan performance data.

Since its launch, the platform has served over 94 lakh customers across rural and semi-urban India. The addition of SME products is expected to drive higher average ticket sizes, potentially improving net interest margins while maintaining a diversified borrower base. Institutional investors watching NBFC digital infrastructure have also praised the platform’s scale and ability to maintain underwriting quality at the last mile.

How is investor sentiment shaping around Paisalo Digital’s SME lending strategy and growth plans?

Investor sentiment around Paisalo Digital has generally remained constructive, with the equity counters actively traded on both BSE and NSE. The stock has benefited from broader tailwinds in the NBFC sector, especially those focusing on co-lending models, which offer asset-light scalability with bank-aligned capital costs.

The shift into SME lending is being viewed as a potential catalyst for margin expansion, especially if the product mix moves toward longer-tenure loans with repeat borrower potential. Institutional investors have also responded positively to the company’s ability to operate in compliance with RBI’s co-lending norms, while building a digital-plus-physical network that supports underwriting resilience.

While exact loan volume projections under the new SME vertical are yet to be disclosed, analysts expect incremental loan growth in double digits over the next 12 months, provided disbursal speed and quality remain stable.

What are the broader implications of this SME co-lending move for India’s financial inclusion and MSME sector health?

The co-lending expansion to SME loans may contribute to closing the formal credit gap for MSMEs, many of which operate in informal ecosystems despite contributing significantly to employment and exports. By introducing a structured, digitally enabled funding mechanism backed by the State Bank of India’s balance sheet, Paisalo Digital is creating a channel that merges formal risk assessment with local market intimacy.

If scaled effectively, this model could serve as a template for other NBFCs and small finance banks seeking to penetrate similar borrower profiles. It also reinforces the credibility of co-lending as a mainstream asset origination mechanism within the Indian financial services landscape.

SME borrowers stand to benefit from faster access to loans with more transparent pricing and lower documentation barriers. This could help stabilize working capital cycles, improve competitiveness, and trigger formalization across vast swaths of India’s fragmented business base.

What is the near-term outlook for Paisalo Digital’s co-lending operations and product diversification strategy?

With the SME loan agreement in place, Paisalo Digital appears poised to transition into a more diversified retail credit institution, moving beyond its legacy focus on microloans. The company’s hybrid infrastructure—3,565 touchpoints and a tested co-lending platform—gives it a defensible moat in last-mile credit delivery.

Near-term growth will depend on effective borrower acquisition, risk modeling precision, and the ability to scale loan origination without compromising asset quality. Future filings may also reflect the company’s attempt to embed more sector-specific credit products, including those for agri-SMEs, rural manufacturers, and service-based micro enterprises.

Looking ahead, institutional observers anticipate further product innovation within the SBI–Paisalo framework, including digitized supply chain financing or GST-linked loan profiling. These initiatives, if deployed, could help Paisalo Digital maintain its early-mover advantage in India’s evolving co-lending ecosystem.