RBI’s Revised Co-Lending Guidelines to Boost NBFC Growth – Crisil

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.

BS