Co-Lending Model: Bank-NBFC Joint Loans Explained
Why in the news
Co-lending, a joint bank-NBFC lending arrangement, is a standard banking-awareness topic showing how credit reaches underserved segments.
Key facts
- Meaning: a bank and a Non-Banking Financial Company (NBFC) lend together, pairing bank funds with NBFC reach and flexibility.
- Capital split: generally 80:20 (bank:NBFC).
- Joint underwriting: both appraise credit and assess risk.
- Risk and return: divided according to each side’s capital.
- Blended rate: mixes both lenders’ rates.
- Servicing, monitoring and compliance duties are clearly allotted.
Process
- Borrower applies on a shared digital platform.
- Loan is funded jointly and paid straight to the borrower.
- Repayments are tracked on integrated systems.
Who gains
| Party | Advantages |
|---|---|
| Banks | Wider reach through NBFC networks; lower individual risk; diversification; NBFC borrower-assessment methods |
| NBFCs | Cheaper bank funds; credibility from bank association; bigger loans or riskier markets with shared risk |
| Borrowers | Faster approval and disbursement; better rates; more credit in semi-urban and rural areas |
Uses
- Home, personal, education, microfinance, SME, agriculture and green-finance loans.
Exam angle
- Capital ratio: 80:20.
- Rate type: blended interest rate.