RBI Issues New Co-Lending Arrangements Directions, 2025: What NBFCs Need to Know

Introduction

The Reserve Bank of India (RBI) has issued fresh guidelines on Co-Lending Arrangements (CLA), effective from January 1, 2026. These revised directions replace the earlier 2020 framework and will impact banks, NBFCs, housing finance companies, and financial institutions engaged in co-lending.

At Vexil Infotech, we help NBFCs align with RBI frameworks and compliance standards. This article outlines the new rules, key changes, and their implications for NBFCs.

What is Co-Lending?

In a co-lending model, multiple regulated lenders, such as banks and NBFCs, jointly finance the same pool of loans. Typically, a bank partners with an NBFC to share risks and broaden reach, particularly in the priority sector.

The RBI (Co-Lending Arrangements) Directions, 2025 aim to promote uniformity, strengthen borrower protection, and support financial inclusion.

Key Highlights of RBI’s Co-Lending Directions 2025

1. Minimum Loan Retention

• Each partner must retain at least 10% of every loan in its own books.
• This ensures shared responsibility and prevents complete risk transfer.

2. Scope and Applicability

• Applicable to:
  • Scheduled Commercial Banks (excluding SFBs, RRBs, LABs)
  • All India Financial Institutions
  • NBFCs (including Housing Finance Companies)
• Not applicable to:
  • Multiple banking
  • Consortium lending
  • Loan syndication

3. Customer Transparency & Protection

• Borrowers must be informed about the main interface entity.
• Loan agreements must define responsibilities for sourcing, servicing, grievance handling, and interest computation.
• Key Facts Statement (KFS) is mandatory for transparency.

4. Interest Rates & Charges

• A blended interest rate will be applied, calculated as a weighted average of each partner’s share.
• All fees and charges must be disclosed upfront in the KFS and included in the Annual Percentage Rate (APR).

5. Operational Framework

• Loan shares must be recorded within 15 days of disbursement.
• All transactions must flow through a joint escrow account.
• A business continuity plan is mandatory to protect borrowers if the arrangement ends.

6. Default Loss Guarantee (DLG)

• Originating NBFCs may provide DLG, capped at 5% of the co-lending portfolio.
• Guarantees must comply with RBI’s digital lending regulations.

7. Asset Classification Norms

• Borrower-level classification applies.
• If one partner classifies an account as NPA, the other must do the same.

8. Mandatory Disclosures

• Lenders must publish their active co-lending partners on their websites.
• Financial statements must include loan volumes, interest rates, fees, performance data, and guarantees.

What This Means for NBFCs

Expert Insight from Vexil Infotech

With over 17 years of experience, Vexil Infotech builds NBFC software solutions that ensure end-to-end compliance with RBI regulations.

Our platforms help NBFCs:

• Manage co-lending partnerships with transparency
• Automate KFS disclosures, blended rate calculations, and escrow settlements
• Report seamlessly to Credit Information Companies (CICs)
• Maintain compliance with minimal manual effort

Technology-led systems can transform these compliance changes into opportunities for growth.

Conclusion

The RBI (Co-Lending Arrangements) Directions, 2025 mark an important step towards a more transparent and borrower-centric co-lending ecosystem.

For NBFCs, compliance is not just mandatory—it can also drive growth and build stronger partnerships with banks. By adopting the right technology, NBFCs can convert regulatory obligations into a competitive advantage.

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