**Executive Summary:**
The Reserve Bank of India (RBI) has issued new directions for Co-Lending Arrangements (CLA) to broaden their scope and provide regulatory clarity. These directions aim to address prudential and conduct-related aspects of co-lending and will come into effect from January 1, 2026, although Regulated Entities (REs) can adopt them earlier based on their internal policies. Existing CLAs must comply with extant regulations.
**Key Points / Main Content:**
* **Applicability:**
* These directions apply to CLAs entered into by Commercial Banks (excluding Small Finance Banks, Local Area Banks, and Regional Rural Banks), All-India Financial Institutions, and Non-Banking Financial Companies (including Housing Finance Companies).
* Digital lending arrangements will be governed by the Reserve Bank of India Digital Lending Directions, 2025 (MDDLD), as amended. However, any digital co-lending must also follow these CLA directions, without undermining MDDLD.
* These directions do not apply to multiple banking, consortium lending, or syndication.
* **Definitions:**
* CLA is defined as an ex-ante agreement between an originating RE and a partner RE to jointly fund a portfolio of loans in a pre-agreed proportion, involving revenue and risk sharing.
* **General Guidelines:**
* Each RE must retain a minimum 10% share of individual loans in its books.
* REs' credit policies must include provisions for CLAs, covering internal limits, target borrower segments, due diligence of partners, and customer service/grievance redressal.
* Agreements between CLA partners must detail terms, borrower selection criteria, product lines, fees, responsibilities, information exchange, customer interface, protection, and grievance redressal.
* Loan agreements with borrowers must disclose the roles and responsibilities of REs, identify the single point of contact, and include customer protection and grievance redressal provisions.
* All CLA details must be appropriately disclosed to borrowers via the Key Facts Statement (KFS).
* REs can claim priority sector status for their share of credit under CLA for eligible loans.
* NBFCs must adhere to accounting standards for booking unrealized profits and deduct such profits from CET 1 capital or net-owned funds.
* **Interest Rate and Other Fees/Charges:**
* Interest rates and fees must be based on contractual agreements and regulatory norms.
* The final interest rate charged to the borrower should be a blended rate, weighted by the proportionate funding share of each RE.
* Changes in rates must comply with credit policies and regulatory norms and be communicated to the borrower.
* All fees charged must be included in the Annual Percentage Rate (APR) and disclosed in the KFS.
* Fees for lending services must be based on objective criteria and should not include credit enhancement or default loss guarantees unless otherwise permitted.
* **Operational Arrangements:**
* Partner RE must commit irrevocably to taking its share of loans originated by the originating RE on a back-to-back basis.
* Respective shares of REs must be reflected in their books within 15 calendar days of disbursement.
* The originating RE must transfer the loan only to the partner RE specified in the agreement and KFS.
* If the originating RE cannot transfer the share within 15 days, the loan remains on its books and can only be transferred under Master Directions on Transfer of Loan Exposure, 2021 (MDTLE).
* Each RE must maintain individual borrower accounts for its share.
* All transactions between REs and borrowers must be routed through an escrow account.
* Loans under CLA must be included in internal/statutory audits.
* REs must have a business continuity plan for uninterrupted service in case of CLA termination.
* REs must comply with KYC norms; partner RE may rely on originating RE for Customer Identification Process.
* REs must follow fair practice codes and grievance redressal mechanisms.
* **Reporting to Credit Information Companies (CICs):**
* Each RE must report its share of loan accounts to CICs as per the Credit Information Companies Regulation Act, 2005, and RBI regulations.
* **Default Loss Guarantee:**
* Originating RE may provide a default loss guarantee up to 5% of loans outstanding under CLA, governed by MDDLD.
* **Asset Classification Norms:**
* Borrower-level asset classification must be applied, meaning if one RE classifies its exposure as SMA/NPA, the same classification applies to the other RE.
* REs must have a near-real-time information-sharing mechanism for asset classification.
* **Transfer of Loan Exposures:**
* Subsequent transfers of loan exposures to third parties or between REs must comply with MDTLE and require mutual consent.
* **Disclosures:**
* REs must disclose a list of active CLA partners on their website.
* Financial statements must include details of CLAs (quantum, interest rates, fees, sectors, performance, default loss guarantee) on a quarterly/annual basis.
* **Repeal Provisions:**
* The circular FIDD.CO.Plan.BC.No.804/09.01/2020-21 dated November 05, 2020, is repealed.
**Impact Analysis:**
* **Commercial Banks, All-India Financial Institutions, and Non-Banking Financial Companies (including Housing Finance Companies):**
* *Impact:* These regulated entities are directly affected by the new guidelines on co-lending arrangements. They must adhere to the specified norms for entering into and managing CLAs.
* *Action Required:* Review and update their credit policies, operational procedures, and agreements to ensure compliance with the new directions. Implement necessary systems for reporting, disclosures, and information sharing.
* **Borrowers:**
* *Impact:* Borrowers will benefit from increased transparency regarding the roles and responsibilities of lending entities, as well as enhanced customer protection and grievance redressal mechanisms.
* *Action Required:* Review loan agreements carefully to understand the terms of the CLA, including the blended interest rate and the roles of the different REs involved.
* **Reserve Bank of India (RBI):**
* *Impact:* The RBI will need to supervise and monitor the implementation of these directions to ensure that co-lending arrangements are conducted prudently and transparently.
* *Action Required:* Develop and implement supervisory mechanisms to monitor compliance with the new guidelines.
* **Credit Information Companies (CICs):**
* *Impact:* CICs must ensure that their systems are capable of capturing and reporting the required information on co-lending arrangements.
* *Action Required:* Update their reporting formats and systems to accommodate the new requirements for reporting CLA-related data.
Key Entities Referenced
Reserve Bank of India: The central bank of India, the primary regulator in this document.
Co-Lending Arrangements (CLA): Formalized agreement between Regulated Entities (REs) to jointly fund a portfolio of loans.
Banking Regulation Act, 1949: A key Indian law governing the regulation of banking companies.
Reserve Bank of India Act, 1934: An act that established the Reserve Bank of India.
National Housing Bank Act, 1987: An act related to the regulation of housing finance in India.
Regulated Entities (REs): Entities that are regulated by the Reserve Bank of India and are permitted to enter into Co-Lending Arrangements.
Non-Banking Financial Companies (NBFCs): Financial institutions that provide banking services without holding a banking license.
Priority Sector Lending: A scheme to ensure credit to vulnerable sections of the society
भारतीय �रजवर् बैंक
__________________RESERVE BANK OF INDIA _________________
www.rbi.org.in
RBI/2025-26/139
DOR.STR.REC.44/13.07.010/2025-26 August 06, 2025
Reserve Bank of India (Co-Lending Arrangements) Directions, 2025
Index
Introduction ............................................................................................................................. 2
Short title and commencement ............................................................................................... 2
Applicability ............................................................................................................................. 2
Definitions ............................................................................................................................... 3
General Guidelines ................................................................................................................. 3
Interest Rate and Other Fees/ Charges .................................................................................. 4
Operational Arrangements ...................................................................................................... 5
Reporting to credit information companies (CICs) .................................................................. 6
Default Loss Guarantee .......................................................................................................... 7
Asset Classification Norms ..................................................................................................... 7
Transfer of Loan Exposures .................................................................................................... 7
Disclosures ............................................................................................................................. 7
Repeal Provisions ................................................................................................................... 8Introduction
Regulated entities (REs) 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 in terms of circular FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated
November 5, 2020.
In view of this and to broaden the scope of co-lending, comprehensive revised
Directions on co-lending arrangements (CLA) are now being issued with the objective
of providing specific regulatory clarity on the permissibility of such arrangements, while
addressing some of the prudential as well as conduct related aspects. These
Directions are issued in exercise of the powers conferred by the Sections 21 and 35A
of the Banking Regulation Act, 1949, read with Section 56 of the Act ibid; Chapter IIIB
of the Reserve Bank of India Act, 1934; and Sections 30A, 32 and 33 of the National
Housing Bank Act, 1987.
Short title and commencement
1. These Directions shall be called Reserve Bank of India (Co-Lending
Arrangements) Directions, 2025.
2. These Directions shall come into force from January 1, 2026, or from any earlier
date as decided by a RE as per its internal policy (“effective date”). Any new
CLA entered into after the effective date shall be in compliance with these
Directions.
3. Existing CLAs (i.e., the lending arrangements executed before the date of
issuance of these Directions) and new CLAs entered into prior to the effective
date shall be in compliance with the extant regulations.
Applicability
4. These Directions shall be applicable to CLAs entered into by the following REs:
a) Commercial Banks (excluding Small Finance Banks, Local Area Banks and
Regional Rural Banks);
b) All-India Financial Institutions; and,
Page 2 of 8c) Non-Banking Financial Companies (including Housing Finance
Companies).
5. Digital lending arrangements shall continue to be governed by the Reserve
Bank of India (Digital Lending) Directions, 2025 (MD-DLD) as amended from
time to time.
Provided that, any digital lending arrangement involving co-lending by
the REs shall, without derogation to the MD-DLD, be guided by the
provisions of these Directions.
6. These Directions shall not apply to loans sanctioned under multiple banking,
consortium lending, or syndication.
7. Save as otherwise permitted in terms of these Directions, no RE shall enter into
any CLA which is not compliant with these Directions.
Definitions
8. For the purpose of these Directions, CLA refers to an arrangement, formalised
through an ex-ante agreement, between a RE which is originating the loans
(‘originating RE’) and another RE which is co-lending (‘partner RE’), to jointly
fund a portfolio of loans, comprising of either secured or unsecured loans, in a
pre-agreed proportion, involving revenue and risk sharing.
9. All other expressions, unless defined herein, shall have the same meaning as
have been assigned to them under the Banking Regulation Act, 1949 or the
Reserve Bank of India Act, 1934 or any statutory modification or re-enactment
thereto or any other relevant regulation or as used in commercial parlance, as
the case may be.
General Guidelines
10. Each RE under a CLA shall be required to retain a minimum 10 per cent share
of the individual loans in its books.
11. 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.
Page 3 of 812. The agreement to be entered between the CLA partners shall include detailed
terms and conditions of the arrangement; the criteria for selection of borrowers;
specific product lines and areas of operation; fees payable for lending
services1, if any; provisions related to segregation of responsibilities; time-
frame for exchanging critical information; customer interface and customer
protection issues and grievance redressal mechanism.
13. The loan agreement signed with the borrower shall make an upfront disclosure
regarding the segregation of the roles and responsibilities (such as sourcing,
and servicing) of concerned REs, including clear identification of the entity
being the single point of interface with the customer. Any subsequent change
in customer interface shall only be done after prior intimation to the borrower.
The loan-agreement shall also appropriately disclose suitable provisions
related to customer protection, and grievance redressal mechanism.
14. All required details of CLA shall be disclosed appropriately to the concerned
borrower as laid down under RBI Circular on ‘Key Facts Statement (KFS) for
Loans & Advances’ dated April 15, 2024 as amended from time to time.
15. REs engaging in the CLA for loans eligible to be classified under priority sector
lending in terms of Master Directions - Reserve Bank of India (Priority Sector
Lending – Targets and Classification) Directions, 2025 (as amended from time
to time), can claim priority sector status in respect of their share of credit under
CLA.
16. NBFCs shall adhere to the applicable accounting standards, while booking of
unrealised profit under CLAs, if applicable. However, such profits, shall be
deducted from CET 1 capital or net owned funds for meeting regulatory capital
adequacy requirement till the maturity of such loans.
Interest Rate and Other Fees/ Charges
17. 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. Specifically, the final interest rate
1 Lending service shall refer to the set of activities related to lending such as customer acquisition,
underwriting, pricing, servicing, monitoring, and recovery of specific loan or loan portfolio, etc.
performed by the REs or their agents (in conformity with extant outsourcing guidelines issued by the
Reserve Bank).
Page 4 of 8charged to the borrower shall be the blended interest rate which is calculated
as an average rate of interest derived from the interest rates charged by
respective REs, as per their internal lending policies and risk profile of the same
or similar borrower, weighted by the proportionate funding share of concerned
REs under CLA.
18. Any change in rates by respective REs under CLA will be made as per their
credit policy and extant regulatory norms, and the same shall be reflected in the
updated blended rate and communicated to the borrower.
19. Any fees / charges payable by the borrower in addition to the blended interest
rate shall be incorporated in computation of annual percentage rate (APR) and
disclosed appropriately in the KFS as prescribed in the paragraph 14 of these
Directions.
20. As part of the credit policy, the RE shall lay down the objective criteria for fees/
charges payable for lending services, depending upon relevant factors such as
the nature of service provided, quantum of loan, etc. Such fees/ charges shall
not involve, directly or indirectly, any element of credit enhancement2/ default
loss guarantee3 unless permitted otherwise.
Operational Arrangements
21. The CLA shall entail an irrevocable commitment on the part of partner RE to
take into its books, on back to back basis, its share of the individual loans as
originated by the originating RE.
22. The CLA shall ensure that the respective shares of the REs are reflected in the
books of both REs without delay after disbursement by the originating RE to the
borrower, in any case not later than 15 calendar days from the date of
disbursement.
2 Credit enhancement means a contractual arrangement in which an entity provides some degree of
added protection to other parties to a transaction to mitigate the credit risk of their acquired exposures;
3 Default loss guarantee is a contractual arrangement, called by whatever name, between the
originating RE and partner RE, under which the former guarantees to compensate the latter, for loss
due to default up to a certain percentage of the loan portfolio of the RE, specified upfront. Any other
implicit guarantee of similar nature linked to the performance of the loan portfolio of the RE and specified
upfront, shall also be covered under the definition of DLG
Page 5 of 823. Originating RE shall also ensure that it transfers the loan under CLA only to the
partner RE, as per the ex-ante agreement and as specified in the KFS at the
time of sanction of loan.
24. If the originating RE is unable to transfer the share of the exposure to the
partner RE under CLA within 15 calendar days for any reason, then the loan/s
shall remain on the books of the originating RE and can be transferred to other
eligible lenders only under the provisions of Master Directions – Transfer of
Loan Exposure, 2021 (MD-TLE).
25. Each RE shall maintain a borrower’s account individually for its respective
share.
26. 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 agreement
shall clearly specify the manner of appropriation between the originating and
partner REs.
27. The loans under the CLA shall be included in the scope of internal/ statutory
audit in each RE to ensure adherence to their respective internal guidelines,
terms of the agreement and applicable regulatory requirements.
28. REs shall implement a business continuity plan to ensure uninterrupted service
to their borrowers till repayment of the loans, in the event of termination of CLA
between the REs.
29. A RE involved under CLA shall comply with the prescribed norms under the
Master Direction - Know Your Customer (KYC) Direction, 2016 as amended
from time to time. Partner RE may rely upon the originating RE for “Customer
Identification Process” as per the provisions of the said Master Directions on
KYC.
30. REs shall be guided by the fair practice code and grievance redressal
mechanism as applicable to them.
Reporting to credit information companies (CICs)
31. Each RE shall adhere to the extant requirements of reporting to CICs for their
share of the loan account, as per the provisions of the Credit Information
Companies (Regulation) Act, 2005 and the Rules and Regulations issued by
RBI therein, from time to time.
Page 6 of 8Default Loss Guarantee
32. Originating RE may provide default loss guarantee up to five per cent of loans
outstanding in respect of loans under CLA. Provision of such default loss
guarantee shall be governed mutatis mutandis in terms of the MD-DLD as
amended from time to time.
Asset Classification Norms
33. 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 end of the next working day.
Transfer of Loan Exposures
34. Any subsequent transfer of loan exposures originated under CLA to third
parties, or any inter-se transfer of such loan exposures between REs, shall be
strictly in compliance with the provisions of MD-TLE. Such transfers to a third
party, however, can be done only with the mutual consent of both the originating
and partner REs.
Disclosures
35. In addition to the applicable disclosure requirements under extant regulations,
REs shall also prominently disclose on their website, a list of all active CLA
partners.
36. REs shall also make appropriate disclosures in their financial statements, under
‘Notes to Accounts’, relating to necessary details of CLAs on an aggregate
basis. The details may inter alia include quantum of CLAs, weighted average
rate of interest, fees charged / paid, broad sectors in which CLA was made,
performance of loans under CLA, details related to default loss guarantee, if
any, etc. The disclosure shall be done on quarterly/annual basis, as applicable
to the concerned REs.
Page 7 of 8Repeal Provisions
37. The following circular shall be repealed with the issuance of these Directions,
without prejudice to provisions of paragraph 3 of these Directions.
S. No. Subject Reference Date
1 Co-Lending FIDD.CO.Plan.BC.No.8/04.09.01/2020- November
by Banks and 21 05, 2020
NBFCs to
Priority
Sector
Page 8 of 8