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Business Standard
4 days ago
- Business
- Business Standard
RBI mandates 10% loan retention for banks, NBFCs under co-lending deals
The Reserve Bank of India (RBI) on Wednesday issued revised regulations for co-lending between banks and non-banking financial companies (NBFCs), effective January 1. All regulated entities (REs) under a co-lending agreement will be required to retain at least 10 per cent of each individual loan on their books. The loan-originating entity will also be permitted to provide a default loss guarantee of up to 5 per cent of the loans outstanding under the agreement. 'Each RE under a co-lending arrangement (CLA) shall be required to retain a minimum 10 per cent share of the individual loans in its books. The credit policy of an 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 RBI said. The central bank has asked entities to frame specific policies for co-lending arrangements, covering internal limits, grievance redressal, due diligence, fees payable, target borrowers, and other conditions. They 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. 'REs shall apply a borrower-level asset classification for their respective exposures to a borrower under CLA, implying that if either of the REs classifies its exposure to a borrower under CLA as SMA/NPA on account of default in the CLA exposure, the same classification shall be applicable to the exposure of the other RE to the borrower under CLA. REs shall put in place a robust mechanism for sharing relevant information in this regard on a near real-time basis, and in any case latest by the end of the next working day,' the RBI said. Any subsequent transfer of loans under a co-lending arrangement to third parties must comply with the norms on the transfer of loan exposures and can be undertaken only with the mutual consent of both the originating and partner REs.
Economic Times
4 days ago
- Business
- Economic Times
RBI issues revised directions on co-lending arrangements
Synopsis Reserve Bank of India has released new guidelines for co-lending arrangements. These rules aim to clarify regulations and address important aspects. Banks and NBFCs can now jointly offer loans under specific conditions. Each lender must retain a minimum 10 percent share. Transactions will occur through an escrow account. The new directions will be effective from January 1, 2026. Reuters The Reserve Bank on Wednesday issued revised directions on co-lending arrangements (CLA) 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 (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. 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 per cent 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 January 1, 2026, or from any earlier date as decided by an RE as per its internal policy.
News18
4 days ago
- Business
- News18
RBI issues revised directions on co-lending arrangements
Mumbai, Aug 6 (PTI) The Reserve Bank on Wednesday issued revised directions on co-lending arrangements (CLA) 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 (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. 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 per cent 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 January 1, 2026, or from any earlier date as decided by an RE as per its internal policy. PTI NKD NKD ANU ANU view comments First Published: August 06, 2025, 18:45 IST Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
