Shares of Paisalo Digital Ltd, a small-cap non-banking financial company (NBFC) backed by LIC and SBI Life, surged over 7 per cent intraday on Friday, following the announcement of a renewed co-lending loan agreement with the State Bank of India (SBI). The development marks a strategic extension of the firm鈥檚 collaboration with India鈥檚 largest lender, with a strong focus on improving credit access to small and medium enterprises (SMEs) across rural and semi-urban India. The stock hit a high of 鈧33.75 during Friday鈥檚 trade, gaining 7.3 per cent before closing with modest gains. The agreement, signed on 26 June 2025, is expected to boost lending in priority sectors and aligns with the Reserve Bank of India鈥檚 November 2020 co-lending framework, aimed at bridging credit gaps by combining the strengths of banks and NBFCs. 鈥淭his new arrangement with SBI underlines our shared vision to expand affordable and timely credit access to the backbone of the Indian economy,鈥 said Santanu Agarwal, Deputy Managing Director, Paisalo Digital, while highlighting the digital-first strategy to cater to Tier 2, Tier 3 and rural markets. Under the co-lending structure, both Paisalo and SBI will jointly handle origination, disbursement, servicing, and recovery of SME loans through an integrated digital platform, offering better turnaround times and minimised operational friction. The platform already boasts 3,565 touchpoints across India and has serviced more than 94 lakh customers, primarily in rural regions. The expansion into SME credit comes as Paisalo seeks to diversify its portfolio beyond microfinance, especially at a time when India鈥檚 SME sector is in urgent need of structured financial support post-pandemic. According to data from the Ministry of MSMEs, India鈥檚 small businesses account for 30 per cent of GDP and nearly 50 per cent of total exports, yet face a persistent credit gap exceeding 鈧25 lakh crore. Paisalo鈥檚 partnership with SBI, first launched in 2021, has now evolved to cater to the underserved SME segment. The renewed focus could drive future earnings growth and unlock new customer segments, analysts say. The NBFC also enjoys institutional backing: as of December 2024, LIC held a 1.35 per cent stake, while SBI Life Insurance owned 9.87 per cent, signalling strong financial endorsement. Stock Performance: A Bumpy Road to Recovery Despite the rally on Friday, Paisalo Digital鈥檚 stock performance has remained volatile over the past year. It is still down over 59 per cent from its 52-week high of 鈧81.95 recorded in July 2024. The stock hit a 52-week low of 鈧29.40 earlier in June 2025 but has since seen a modest recovery of 3.6 per cent this month. The NBFC has faced a six-month losing streak, falling 5 per cent in April and May, 8 per cent in March, 14 per cent in February, and 13 per cent in January 2025. A more stable lending environment and the success of its SME co-lending drive may help turn the tide. Market watchers believe that strategic co-lending partnerships such as this could be instrumental for NBFCs in expanding credit reach without overleveraging, especially in India鈥檚 financially excluded geographies. Get Latest News live on Times Now along with Breaking News and Top Headlines from Business, Companies and around the world.