The Reserve Bank on Wednesday issued revised directions on co-lending arrangements to provide specific regulatory clarity on the permissibility of such arrangements and address some of the prudential as well as conduct-related aspects.
Regulated entities, including banks, NBFCs, and All-India Financial Institutions, can enter into a lending arrangement with other REs for extension of credit to the borrowers, subject to compliance with the extant prudential regulations.
While there is no generic regulatory framework for such lending arrangements, co-lending involving banks and NBFCs has gained traction in the wake of a specific regulatory framework being prescribed for the purpose of priority sector lending.
CLA refers to an arrangement, formalised through an ex-ante agreement, between an RE which is originating the loans and another RE which is co-lending, to jointly fund a portfolio of loans in a pre-agreed proportion, involving revenue and risk sharing.
"Each RE under a CLA shall be required to retain a minimum 10% share of the individual loans in its books." said the Reserve Bank of India (Co-Lending Arrangements) Directions, 2025.
It further said the credit policy of a RE shall suitably incorporate provisions relating to CLAs, including the internal limit for the proportion of their lending portfolio under CLAs; target borrower segments; due diligence of the partner entities; customer service and grievance redressal mechanism.
"The interest rate and any other fees/charges on the underlying loans charged to the borrower shall be based on the contractual agreement, subject to the regulatory norms applicable to the REs." the RBI said.
According to the revised norms, all transactions (disbursements/repayments) between the REs, as well as with the borrower, shall be routed through an escrow account maintained with a bank, which could also be one of the REs involved in CLA.
The directions shall come into force from Jan. 1, 2026, or from any earlier date as decided by an RE as per its internal policy.
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