The Reserve Bank of India Issued Reserve Bank of India (Co-Lending Arrangements) Directions, 2025 on August 06, 2025 repealing the erstwhile co lending guidelines issued in 2020 Before going further it’s imperative to understand that what is the co-lending and why it gain popularity in NBFCs
Synopsis of Co-Lending
Co Lending is a kind of arrangement between Banks & NBFCs or between NBFCs Per Se for jointly lending the loan to borrower , the basic purpose of co lending resides due to three prime reason(s)
- Complete the PSL target of Banks because NBFCs serve the Unserved and Underserved strata of society
- Providing Lower interest Rate to Prospective borrowers ( because NBFCs lend at Higher Rate than Banks due to Cost of Funds remains High)
- Increase In Book Size of Originating RE / NBFC ( Fees , Charges all are kept by the Originating RE )
The Co-Lending Model Divided Into two parts
1, CLM -1 ( It’s a direct assignment of Portfolio of Loans on Back-to-Back Basis without giving any right to Funding RE to cherry pick or MHP stipulations )
2. CLM- 2( Here the loan account will remain in the book of Originating RE with MHP Conditions and Transfer to RE Only after certain period with the condition of cherry picking by the Funding RE , certain basic covenants include -Performance & Servicing Criteria )
What are the pre-conditionalities for the com-lending ?
- Finding Co Lending Partner
- Board Approved Policy
- Master Agreement ( Setting Out the Terms , Risk , Underwriting , Events of Default Etc. .)
- Execution and Assignment of Loan Transfer to Funding RE
What’s the New in Co Lending Guidelines ,2025 ?
The First thing RBI do is taken away CLM -2 , which means cherry picking of loans will not be allowed , if done it will be covered by TLE Directions .with timelines of 15 days to completing the transfer of loan to Funding Partner , which remove the discretionary clause/ right to Funding Partner.
Minimum share of 10% is required by each co -lender.
The DLG which is currently allowed only for digital lending is now extended to Co Lending Model , resulting in Pool of portfolio can be secured by the 5% DLG by Originating RE (an assurance to funding RE ). However, there should not be any kind of deferral of servicing fees.
There will not be any kind of GAIN ON SALE because CLM -2 done away.
KFS now reuired additional discourse as per Guidelines
Any Kind of Change In Assets Classification should be disclosed by the ‘ END OF Next Working Day “
Disclosure In Notes to Accounts Regarding the Loans under Co lending Arrangements and loan assigned in quarterly / yearly FS ( previously being applicable to quarterly basis) in case of listed companies(s) it’s applicable on Q/HY and FY basis…
In case of any changes in customer interface , then prior intimation will be given for the same.
Website disclosure of all RE Partners to be disclosed prominently by the listed entity.
The crux of the recent Co Lending Guidelines are win -win situation for the both the lenders , while there is a complete done away of CLM -2 with the precondition to transfer the respective share of Funding RE within 15 days without any delay , e Min Holding of 10% contribution by the Originating RE and additional 5% cushion in form of DLG, website disclosure and Notes to accounts with prompt disclosure of any changes in customer interface , interestingly it will be applicable for both NBFC to Banks and NBFC to NBFC Co Lending Arrangement , the Effective Date of Guidelines are from 01st Jan 2026 but it can be implemented earlier by the Respective RE.
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Disclaimer :- Please Note that information provided hereinabove is just to keep abreast the professional community with the recent developments and not any kind of advice which can be acted upon . Errors and Omissions including interpretation may be different.
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