Context:
RBI has issued revised co-lending guidelines, expected to create more growth opportunities for Non-Banking Financial Companies (NBFCs), as per Crisil Ratings. The changes broaden regulatory oversight and lending flexibility while reducing funding constraints for smaller NBFCs.
Key Highlights:
- Applicability – Extended to all arrangements between all Regulated Entities (REs) and all forms of loans (secured and unsecured).
- Minimum Retention Requirement – REs must retain at least 10% of loans on their books, down from the 20% requirement for NBFCs earlier.
- Benefit for Smaller NBFCs – Lower retention eases funding pressure for mid- and small-sized NBFCs.
- Direct Lending Guarantee (DLG) – Originating REs can now provide DLG of up to 5% of loans across all lending forms, earlier limited to digital lending.
- Uniform Asset Classification – All co-lending partners must follow consistent classification for a given loan exposure, ensuring transparency and standard risk assessment.
Impact Analysis by CRISIL
- Growth Catalyst – Broader scope and reduced retention norms likely to expand NBFC loan books.
- Risk Sharing – DLG expansion strengthens collaboration between banks and NBFCs.
- Regulatory Uniformity – Common asset classification promotes fair borrower profiling and reduces disputes.
