Co- Lending Arrangements- Directions and Requirements
Background: Regulated entities (REs) perform various roles in co-lending transactions from sourcing activities to extension of loan facilities to borrowers, and RBI has issued separate guidelines covering co-lending by banks with NBFCs to priority sector, guidelines on outsourcing of financial services, however, the regulatory frameworks do not cover all possible categories of co-lending arrangements (CLA). On 9 th April, 2025, the Reserve Bank of India has issued comprehensive draft framework [1] to cover all market trends related to different types of CLA entered by financial entities. The said directions stipulate regulatory norms and guidance for REs, and also seek to address prudential issues. Post receipt of comments from industry experts, financial sector, legal professionals, academicians, etc, RBI has proposed to issue directions that will govern co-lending arrangements by REs, which shall come into force from date of its publication. Appli...