Co-Lending Rules for NBFCs and Banks

FICCI Urges RBI to Retain Existing Co-Lending Rules for NBFCs and Banks: NBFCs originate loans and then sell up to 80% of the loan to partner banks via direct assignment. This model provides NBFCs operational flexibility and benefits from a waiver on minimum holding period for the loans sold to banks. As per ICRA (April 2025), co-lending assets under management (AUM) reached ₹80,000 crore by March 2024, showing strong growth.

Key Highlights:

• RBI’s Proposed Change:
  • Shift from the current model to a joint lending model, where banks and NBFCs would simultaneously underwrite and disburse loans.
  • This new approach requires both lenders to share the loan underwriting process and disbursal, changing the operational dynamics.
• FICCI’s Concerns and Arguments:
  • Repealing the current ‘track 2’ rules would be highly disruptive and could significantly reduce credit availability to vital customer segments and sectors.
  • The proposed joint lending model could force NBFCs to scale back operations, risking job losses in the sector.
  • It may strain liquidity, increase risk exposure, and introduce operational inefficiencies.
  • The change may undermine the effectiveness of co-lending partnerships and harm financial inclusion efforts.
• FICCI’s Appeal:
  • Urges RBI to preserve the existing ‘track 2’ co-lending framework.
  • Emphasizes the importance of a regulatory environment that supports NBFCs’ role in credit access and financial inclusion.

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