RBI Co-lending Rules: Wider Framework Beyond PSL
Why in the news
The Reserve Bank of India signalled an inclusive co-lending model that would require banks and NBFCs to disburse loans together, possibly replacing the current originate-and-assign route. The Finance Industry Development Council (FIDC) prepared to present NBFC concerns.
Key facts
- Co-lending: two lenders, such as a bank and an NBFC, jointly fund a loan portfolio in an agreed proportion and share revenue and risk.
- Proposed change: simultaneous disbursal by both partners.
- Scope to widen from priority sector lending (PSL) to all regulated entities and loan types.
- Escrow accounts are used to keep arrangements transparent and compliant.
| Feature | Existing framework | Expanded framework |
|---|---|---|
| Parties | Banks and NBFCs only | All regulated entities |
| Scope | PSL categories only | All loan types |
| Typical roles | NBFC originates and services; bank shares funding and risk | Joint disbursal |
Why change was needed
- Models grew complex, sometimes involving fintechs and layered structures.
- Some set-ups raised borrower interest rates.
- Uneven risk sharing created regulatory grey areas.
- Need for transparency, grievance redressal and fair lending.
Benefits
- Wider credit access, including underserved areas.
- Risk diversification and lower blended cost of credit, as cheap bank funds combine with NBFC reach.
- Better credit delivery through lenders’ distribution networks.
Related developments
- FY26 inflation forecast cut to 4%.
- Repo rate cut by 25 bps; stance now accommodative.
- NPCI may revise P2M UPI limits after talking to banks.
- RBI plans market-based resolution through securitisation of stressed assets.
Exam angle
- Body representing NBFCs: FIDC.
- Co-lending was earlier limited to priority sector lending.
- Repo rate move: 25 bps cut; stance: accommodative.