Context:
- The Reserve Bank of India (RBI) has issued a draft framework to expand co-lending arrangements beyond banks and NBFCs, aiming to include all regulated entities.
- The new framework allows co-lending for all types of loans, not just priority sector lending, unlocking a wider credit delivery channel.
Key Highlights of the Proposed Framework
- Existing Guidelines: Currently apply only to co-lending between banks and NBFCs, restricted to priority sector lending.
- Proposed Expansion: Co-lending will be permitted for any loan category—both priority and non-priority—between:
- Commercial Banks
- Non-Banking Financial Companies (NBFCs)
- Excluded Entities: Regional Rural Banks (RRBs), Small Finance Banks (SFBs), and Local Area Banks will not be eligible under this framework.
Operational Model
- A Co-Lending Arrangement (CLA) enables two financial institutions to jointly disburse loans based on a pre-agreed lending proportion.
- Banks involved in priority sector co-lending can still claim PSL credit for their share.
Regulatory Disclosure Requirements
- Participating institutions must clearly disclose:
- Targeted borrower segments
- Loan terms and pricing
- Internal exposure limits for borrowers
- Risk-sharing agreements
Expected Impact
- Enhances financial inclusion and credit flow to underserved segments.
- Encourages collaborative lending practices while maintaining transparency and risk discipline.
- Supports portfolio diversification and capital efficiency for lenders.
