Reconciliation at the time of loan disbursement and collection is necessary for co-lending. The collection and disbursement reconciliation is supposed to be done on the originator and the investor’s Loan Management System(LMS).
While this helps both investors and originators have up-to-date data about the collections from the end borrowers, it gives investors insight into their share of collections obtained from the originator.
The perils of manual & offline settlement
In the co-lending format, the originator or the NBFC disburses the loan jointly with the investor or the bank and services the end-to-end loan process. The originator then receives 100% of the collections from the end borrowers on a daily basis.
After the collections from the end borrowers are made, the data for the same has to be uploaded on the Yubi marketplace. Both the originator and the investor have to share the collection amount basis of the loan-sharing agreement signed at the time of loan origination and disbursement. Post the settlement, the co-lending parties’ finance teams had to exchange data offline and update their records.
A similar problem was arising at the time of disbursement. For example, when the originator is servicing the loan, they have to disburse 100% of the amount and later reconcile with the investor via an offline medium to keep the records updated and in sync. Reconciliation was also an issue when both the investor and the originator disburse the loan amount from a joint account.
The process was not only time-consuming but also required copious manual effort.
Reconciliation on LMS
With the latest update on YubiCo.lend, the finance teams of both the investor and the originator can reconcile the collection and disbursement data on the Yubi marketplace to ensure that the data on Yubi and that on the originator/investor’s Loan Management System matches.
Impact on investors and originators
The most significant impact the latest update brings to the table is the reduction of manual efforts to reconcile collection and disbursement data. Since this due diligence has to be done regularly, the update will give more room to the finance teams of both the originators and investors to focus on other business activities.
Additionally, this update will eliminate the need for originator and investor finance teams to reconcile and exchange data offline. All reconciliation done on the Yubi marketplace will prevent any loss of data and improve accountability and reconciliation efforts.