Reserve Bank of India (Co-Lending Arrangements) Directions, 2025 – Summary
The Reserve Bank of India (RBI) has issued comprehensive directions for co-lending arrangements (CLAs) to broaden their scope beyond the earlier priority sector framework. Issued under the Banking Regulation Act, RBI Act, and NHB Act, these guidelines aim to provide regulatory clarity, ensure prudent risk-sharing, and address customer protection aspects.
Applicability
Effective January 1, 2026 (or earlier if adopted), these directions apply to:
- Commercial Banks (excluding SFBs, LABs, RRBs)
- All-India Financial Institutions
- NBFCs (including HFCs)
They exclude multiple banking, consortium lending, and syndication. Digital lending arrangements with co-lending must comply with both these directions and the RBI’s Digital Lending Directions.
Key Definitions
A CLA is an ex-ante agreement between an originating RE and a partner RE to jointly fund loans in a pre-agreed proportion, sharing revenue and risk.
General Guidelines
- Each RE must retain minimum 10% of individual loans on its books.
- REs must integrate CLA policies into their credit framework, including limits, partner due diligence, borrower segments, and grievance redressal.
- CLA agreements should clearly define terms, borrower selection, product lines, fees, operational roles, and timelines for sharing information.
- Loan agreements must disclose RE roles, customer interface details, and grievance mechanisms.
- For priority sector lending, REs can claim credit for their funded share.
- NBFCs must follow accounting standards; unrealised profit under CLAs is deducted from regulatory capital until loan maturity.
Interest Rates & Charges
- Borrowers are charged a blended interest rate, weighted by each RE’s funding share.
- Changes in RE rates must be reflected in the blended rate and disclosed.
- Fees must be objective, service-based, and free from implicit credit enhancements unless permitted.
Operational Arrangements
- Partner RE must irrevocably commit to its loan share within 15 days of disbursement.
- Transactions are routed via a joint escrow account.
- Loans must be included in internal/statutory audits.
- KYC norms apply; partner REs may rely on originating RE for customer identification.
Risk & Reporting
- Originating RE may provide a Default Loss Guarantee up to 5% of loans outstanding.
- Asset classification is borrower-level — default by one RE applies to the other.
- Loan transfers must comply with RBI’s Transfer of Loan Exposure norms.
- Each RE must report its share to Credit Information Companies.
Disclosures
REs must disclose all active CLA partners on their websites and provide aggregate details in financial statements, including quantum, rates, fees, sectors, performance, and guarantees.
