Co-lending norms: Tech integration could prove a hurdle

Mumbai: Both mainstream banks and non-bank lenders could shift to the direct assignment route on co-lent assets, anticipating a slowdown in such deals after the central bank decided to tighten rules, industry experts said. The co-lending industry is estimated to be in excess of ₹1 lakh crore.

Lenders said the new Reserve Bank of India (RBI) rules on co-lending deals would require significant technology integration between banks and non-banking finance companies ( NBFC), increasing operational complexity.

"For a high-rated non-bank lender with stable bank lines and liquidity, the additional compliance, 15-day assignment window, and credit policy alignment may not justify the administrative complexity," said the CEO of an NBFC. "But for a low-rated NBFC or HFC struggling to raise funds, the new arrangement along with default loss guarantee (DLG) is a game-changer. It unlocks liquidity and credit risk comfort."

Stricter rules could lead to a slowdown in co-lending of operationally intensive assets such as home loans, loans against property, and MSME loans, as these typically involve longer disbursement timelines, experts said. Differing asset classification norms between banks and NBFCs may create challenges in meeting uniform classification standards under the revised guidelines.

As per the new rules, DLG to the funding partner is capped at 5% of the pooled loan amount. The guarantee must be invoked only after 90 days of delinquency and must be extinguished within 120 days of invocation.

Industry insiders say that smaller NBFCs can still originate customers while the credit risk is partially covered through the DLG mechanism-boosting their ability to scale responsibly.



Under the earlier co-lending Model, a sourcing partner could originate and hold a loan for a few months before assigning it to the funding partner. This staggered assignment window created flexibility in managing onboarding timelines, credit filters, and system syncs.

That flexibility is now gone.

As per the new norms, assignment must be completed within 15 days of the loan being originated. Loans must be sourced as per a jointly approved credit policy-no unilateral underwriting or deviation. All terms, conditions, and the nature of co-lending must be disclosed to the customer upfront.

Yashoraj Tyagi, CEO of the digital lending platform, CASHe, said that the RBI's revised norms provide much-needed regulatory clarity and broadens the scope of eligible lending partnerships.

"At the same time, the increased operational responsibilities-including mandatory escrow arrangements, enhanced due diligence of partner entities, and integration of co-lending protocols within internal credit policies-will require significant investment in compliance, technology and governance."