Co-Lending by Banks and NBFCs to Priority Sector

Co-Lending by Banks and NBFCs to Priority Sector

RBI in its Third Bi-Monthly Monetary Policy Statement 2018-19 introduced the Co-origination Model between Banks and Non-Banking Financial Companies – Non-Deposit taking – Systemically Important (NBFC-ND-SIs) for providing competitive credit to priority sector.

Based on the feedback received from the stakeholders and to better leverage the respective comparative advantages of the banks and NBFCs in a collaborative effort, RBI has now decided to rename the scheme as “Co-Lending Model” (CLM) to provide greater operational flexibility to the lending institutions, while requiring them to conform to the regulatory guidelines on outsourcing, KYC, etc..

In terms of the CLM, banks are permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement. The co-lending banks will take their share of the individual loans on a back-to-back basis in their books. However, NBFCs shall be required to retain a minimum of 20 per cent share of the individual loans on their books.

The banks and NBFCs shall formulate Board approved policies for entering into the CLM and place the approved policies on their websites. Based on their Board approved policies, a Master Agreement may be entered into between the two partner institutions which shall inter-alia include, terms and conditions of the arrangement, the criteria for selection of partner institutions, the specific product lines and areas of operation, along with provisions related to segregation of responsibilities as well as customer interface and protection issues,

The Master Agreement may provide for the banks to either mandatorily take their share of the individual loans originated by the NBFCs in their books as per the terms of the agreement, or to retain the discretion to reject certain loans after their due diligence prior to taking in their books, subject to the prescribed conditions.

The banks can claim priority sector status in respect of their share of credit while engaging in the CLM adhering to the specified conditions. The CLM shall not be applicable to foreign banks (including WOS) with less than 20 branches.

Read Essential Features of Co-Lending Model between Banks and NBFCs Click Here >>

• Resolution plan to include a statement of beneficial-ownership of all natural persons
• Change in the address of DRAT, Allahabad with effect from 11.12.2025
• Banks authorised to import only gold for FY 2025-26 from 01.04.2025 to 31.03.2026
• Under POCM, selling/Admin costs allowable despite no revenue declared – ITAT
• AO can’t use reverse computation using TDS amount for disallowance u/s 40(a)(ia)