Context:
- Issued by the Reserve Bank of India (RBI) in April 2025.
- Expanded the scope of co-lending to include all regulated entities, such as banks and NBFCs.
- Extended applicability to non-priority sectors, beyond just priority sector lending (PSL).
- Aim: Improve regulatory clarity, credit flow to underserved sectors, and ensure real-time data integration for better risk monitoring.
Technological and Operational Implications
- The RBI mandates simultaneous origination and disbursement of loans.
- NBFCs must upgrade IT systems to enable real-time information sharing with banking partners.
- Full-scale tech integration may take most of FY26, say NBFC executives.
- Operational alignment between banks and NBFCs will require at least 6 months, due to complex tech and process overhauls.
Concerns Around Colending Model 2 (CLM 2)
- Draft guidelines do not clarify the status of CLM 2, widely used by banks and NBFCs.
- In CLM 2, NBFC retains minimum 20% of the loan on its books; bank takes 80%.
- In CLM 1, both entities co-originate and disburse loans simultaneously.
- Focus on CLM 1 may disrupt existing colending partnerships.
- Industry has called for clarity and flexibility to accommodate both models.
Expected Outcomes
- Once systems are upgraded, the guidelines are expected to:
- Facilitate standardised and scalable colending arrangements
- Improve transparency and borrower tracking
- Boost credit access in non-priority and underserved segments
BS
