The Reserve Bank of India (RBI) has brought a big change in how loans are given jointly by banks and financial companies. In its latest Monetary Policy update, RBI released a draft framework for co-lending—a process where two or more institutions, such as banks and NBFCs, give a loan together to a customer and share both risk and profit.
Till now, RBI had issued limited guidelines for co-lending only in some cases, like priority sector loans or digital lending. But now, this 2025 Co-Lending Draft covers all types of co-lending arrangements. The goal is to make the process more transparent, safer, and customer-friendly.
These Institutions Must Follow the New Rules
The new framework will apply to:
- All Public and Private Sector Banks
- All India Financial Institutions
- All NBFCs (Non-Banking Financial Companies)
- Housing Finance Companies (HFCs)
Note: These rules do not apply to Small Finance Banks (SFBs), Local Area Banks (LABs), and Regional Rural Banks (RRBs).
Customers Must Be Informed About the Loan Arrangement
One of the key changes in the draft is the importance of customer awareness. Whenever a loan is given under co-lending, the borrower must receive a Key Facts Statement (KFS). This document will mention:
- Which company is providing what part of the service
- Who will handle customer interaction
- Who will be responsible for customer service and recovery
If any of this changes later, the customer must be informed and their consent must be taken.
New Recovery and Payment Rules for Joint Loans
To make the loan process more secure and transparent, RBI has said that:
- Loan repayments must be done through a joint escrow account so that all money transactions are traceable and recorded.
- Each institution (bank or NBFC) must show its share of the loan separately in its own balance sheet.
- They also need to send separate loan data to Credit Information Companies (CICs).
If one of the institutions declares the loan as a Non-Performing Asset (NPA), then the same loan will be treated as NPA by all other lenders involved in that loan.
Default Loss Guarantee (DLG) Has a Limit
In co-lending models where a Default Loss Guarantee (DLG) is included (a way to protect one lender from losses), the limit for DLG has been fixed at 5% of the total loan value. This is to stop misuse of guarantees and keep the lending process fair.
Grievance Redressal Must Be Fast and Efficient
To protect borrowers, the RBI has set a strict timeline for resolving complaints:
- If any bank or NBFC receives a customer complaint, they must solve it within 30 days.
- If not, the customer has the right to raise the issue on the RBI’s Complaint Portal.
All institutions involved in co-lending must also mention this process clearly on their websites and financial reports, so that customers know where to go if they face any issue.
New Co-Lending Models Need RBI Approval
If any bank, NBFC, or finance company wants to create a new co-lending structure that is not included in this draft framework, they must first take RBI’s permission.
By setting these clear rules, RBI wants to increase accountability and trust in joint lending. It will ensure customers are well-informed, well-protected, and not trapped in unclear loan agreements.
This move is expected to benefit both lenders and borrowers by bringing more order and structure to co-lending in India.
