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RBI Issues Final Co-lending Norms to Strengthen Risk Sharing and Transparency.

Banking & Finance | Dated: 08 Aug 2025

The Reserve Bank of India (RBI) has issued final revised guidelines for co-lending between banks and Non-Bank Financial Companies (NBFCs) to enhance transparency and ensure balanced risk-sharing. The updated norms, issued in August 2025, will take effect from January 1, 2026.

🎯 Key Highlights:

  • - The revised norms make it mandatory for all Regulated Entities (REs) engaged in Co-lending Arrangements (CLAS) to retain at least 10% of each individual loan in their own books. This provision applies to all banks and NBFCs operating under the Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; and National Housing Bank Act, 1987.
  • - The RBI has clarified that digital lending arrangements will continue to be governed by the Reserve Bank of India (Digital Lending) Directions, 2022. This ensures that both physical and digital co-lending models maintain regulatory compliance and borrower protection standards.
  • - The guidelines specify a strict timeline, requiring the originating lender to transfer the loan portion to the co-lender within 15 days of loan origination. This is aimed at preventing operational delays and ensuring a smooth flow of credit between lending partners.

💡 Other Important Facts:

  • (i) Under the new rules, originating lenders may offer a maximum Default Loss Guarantee (DLG) of 5% of the outstanding loan portfolio, subject to conditions, to support credit enhancement. The applicability of these norms covers Small Finance Banks (SFBs), Regional Rural Banks (RRBs), Local Area Banks (LABs), financial institutions, and all categories of NBFCs, including Housing Finance Companies (HFCs).
  • (ii) These finalised co-lending rules are expected to improve risk-sharing mechanisms, enhance operational efficiency, and expand credit access to underserved sectors of the economy while ensuring stronger regulatory oversight.

📚 Test Your Knowledge:

As per the new RBI co-lending norms, regulated entities must retain at least what percentage of each individual loan in their own books?

Correct Answer: 10%

🚀 Quick Recap: