The Reserve Bank of India (RBI) has issued new rules for co-lending arrangements (CLA) agreements where two or more financial institutions jointly lend money to borrowers.
These rules will apply from 1 January 2026, or earlier if a regulated entity chooses, according to the RBI’s internal policy, and aims to make co-lending clear, fair and safe for both borrowers and lenders.
The revised rules apply to 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 will continue to follow the . However, if digital platforms are involved in co-lending, they will fall under the new CLA rules. Existing co-lending deals will continue under the old rules until the new ones take effect.
A CLA is a formal agreement where one institution originates the loan (called the originating RE, or regulated entity) and the other institution co-lends (partner RE), sharing both the money lent and the risk. Each lender must keep at least 10% of the loan on its own books.
The rules require that lenders include co-lending arrangements in their credit policies, setting internal limits, target borrowers and procedures to check the partner institution, and handle customer complaints. Borrowers must be clearly informed about which institution is their main point of contact, and any change must be communicated in advance. All CLA details must also be disclosed in the key facts statement.
Borrowers will pay a blended interest rate, calculated based on the share of each lender involved in the loan. Any other fees must be included in the annual percentage rate and disclosed clearly.
Lenders must record their share of the loan in their books within 15 calendar days of disbursement. Each lender maintains separate borrower accounts. All money flows are routed through an escrow account, ensuring proper allocation. Lenders must maintain business continuity and follow know-your-customer and fair practice rules.
Each lender reports its share to credit information companies. If one of two lenders classifies a loan as a non-performing asset or stressed asset, the same applies to the other lender. Originating lenders may provide a default loss guarantee of up to 5% of the loan amount. Loan transfers to third parties require mutual consent by the originating and partner regulated entities.
Lenders must publish their active co-lending partners and provide details in financial statements, such as loan size, interest rates, fees, sectors and performance.
