NEWS
RBI’s new co-lending norms for banks, NBFCs
RBI mandates all regulated entities under a co-lending agreement to retain at least 10% of each individual loan on their books.
RBI mandates all regulated entities under a co-lending agreement to retain at least 10% of each individual loan on their books.
The Reserve Bank of India (RBI) has mandated that all regulated entities under a co-lending agreement will have to retain at least 10% of each individual loan on their books.
The loan-originating lender is also required to provide a default loss guarantee of up to 5% of the loans outstanding under the agreement.
Regulated entities (REs), 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.
According to the RBI circular, the credit policy of an RE shall suitably incorporate provisions relating to co-lending arrangements (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 entities must also provide upfront disclosures on the roles of the entities involved.
If a loan is classified as a Special Mention Account (SMA) or non-performing asset (NPA) by one lender, the same classification must be applied by the co-lending partner for its exposure to that borrower.
If a lender classifies its exposure to a borrower as a special mention account (SMA) or non-performing asset (NPA), the same status must be applied by the co-lending partner for its share of the loan to that borrower.
REs must also share relevant credit information on a near real-time basis, and no later than the end of the next working day.
Transfer of loans under a co-lending arrangement to third parties can be undertaken only with the mutual consent of both the originating and partner REs.
As per the revised norms, all transactions (disbursements/repayments) between the REs, as well as with the borrower, will have to go through an escrow account maintained with a bank, which could also be one of the REs involved in CLA.
The new norms shall come into effect from 1 January 2026 or from any earlier date as decided by an RE as per its internal policy.
