The Reserve Bank of India (RBI) has issued a new regulatory framework governing co-lending arrangements between regulated entities, effective from 1 January 2026 (unless a lender chooses to adopt it earlier). These rules reshape how banks, NBFCs and eligible financial institutions jointly lend to borrowers and are intended to streamline operational practices, improve transparency in pricing and enhance borrower protection.

The framework applies to commercial banks, all-India financial institutions and NBFCs, including housing finance companies. One of the important changes compared to prior frameworks is that co-lending is no longer restricted predominantly to priority sector lending. The new framework applies to both secured and unsecured lending. If a co-lending arrangement involves a digital lending interface, then both the digital lending guidelines and the co-lending guidelines must be complied with.

Scope and applicability

The directions apply to commercial banks (excluding small finance banks, regional rural banks and local area banks), all-India financial institutions and NBFCs, including housing finance companies.
The rules apply to both secured and unsecured loans under co-lending arrangements.
Digital lending platforms may be used, but the co-lending partner must ensure all disclosures and governance standards are aligned with digital lending guidelines where applicable.

Minimum retention and funding obligations

Each regulated entity must retain a minimum of ten percent of each individual loan in its own books.
The partner entity must irrevocably commit to its share of funding at the time of sanction.
Once the loan is disbursed, the respective share of funding must be reflected in the books of both regulated entities within 15 (fifteen) calendar days. If this is not complied with, the transaction will be treated as a loan transfer under the relevant transfer of loan exposure directions rather than a co-lending arrangement.

Pricing, fees and borrower disclosures

The overall pricing of the product must reflect a blended rate, meaning a weighted average of the interest rates applicable to each lender’s share.
All applicable fees must be factored into the annual percentage rate disclosed to the borrower.
The loan agreement must clearly specify which lender serves as the borrower’s primary point of contact, and the allocation of operational and regulatory responsibilities between the parties.

Asset classification, reporting and guarantees

Classification of the loan must be done at the borrower level. If one lender classifies an account as stressed or non-performing, the other must follow the same classification for its share.
Each lender must report its exposure to credit information companies in accordance with the law.
Default loss guarantees may be permitted under certain limits and conditions, but only if expressly permitted under the applicable regulatory framework.

Operational controls and governance

All disbursements and repayments must flow through an escrow mechanism operated in line with applicable law.
Each lender must maintain its own records and loan account for its respective share.
A co-lending arrangement may only proceed if the credit policy of both entities reflects appropriate governing principles, including due diligence on the co-lending partner, customer grievance handling and record retention.

Practical implications for lenders and borrowers

The introduction of a mandatory retention requirement and the borrower-level synchronisation of asset classification increases the need for operational coordination between partners. Lenders will need to update credit policies, technological systems and documentation templates. The new blended-rate disclosure framework also improves pricing transparency, which may enhance borrower confidence in joint lending products.

For many NBFCs, the reduced capital retention requirement may improve access to funding partnerships. However, the fifteen-day booking requirement means that back-end processes must be robust and synchronised. Borrowers benefit from having a single designated point of contact and consistent classification and servicing standards.

Revised RBI Co-Lending Directions, 2025