Co-Lending Rules 2026: How Bank–NBFC Partnerships Must Treat Borrowers
Current position
The RBI Co-Lending Arrangements Directions, 2025 apply from 1 January 2026, unless a regulated entity adopted them earlier. They cover specified commercial banks, all-India financial institutions and NBFCs including housing finance companies. Each participating regulated entity must retain at least 10% of each individual loan on its books, subject to the directions.
How it works
The arrangement should define origination, underwriting, disbursal, servicing, collections, customer support and default management. Outsourcing does not remove a regulated entity’s responsibility.
The borrower should receive a Key Facts Statement and understand the blended interest rate, fees, penal charges and which entity reports to credit bureaus.
Fund flows should follow the prescribed escrow or direct account architecture. A lending service provider should not become an unexplained pool for customer money.
| Issue | Current position | Why it matters |
|---|---|---|
| Effective date | 1 January 2026 | Earlier adoption was permitted |
| Minimum retention | At least 10% by each regulated entity | For each individual loan |
| Borrower disclosure | Roles, KFS, APR and blended rate | Responsibility must be clear upfront |
Practical example
A borrower receives a ₹10 lakh business loan marketed by an app. The sanction actually consists of ₹8 lakh from a bank and ₹2 lakh from an NBFC. The KFS should explain the blended APR, repayment account, servicing entity and grievance officers. If recovery calls come from an unidentified third party, both regulated lenders remain accountable for their arrangement.
Action checklist
- Identify both regulated lenders before signing.
- Compare KFS, APR, fees and repayment schedule with the sanction.
- Check disbursal and repayment account details.
- Preserve consent, communication and credit-bureau reporting.
- For lenders, audit underwriting allocation, retention and customer-service controls.
Evidence and document checklist
- KFS, sanction letter and loan agreement.
- Disbursal and repayment bank trail.
- Co-lending allocation and servicing record.
- Grievance-officer details and complaint tickets.
- Credit report and recovery-agent communication.
Common mistakes
- Treating the app as the legal lender without checking.
- Quoting only one partner’s rate.
- Allowing repayment to a personal or unknown account.
- Assuming outsourcing transfers regulatory responsibility.
Red flags
- One lender is missing from documents.
- APR differs between app and KFS.
- Customer data is shared without clear consent.
- Recovery agent cannot identify the appointing regulated entity.
Escalation and complaint route
Complain first to the designated regulated entity or entities. If the response is rejected, unsatisfactory or delayed beyond the applicable period, use RBI’s Complaint Management System where covered. Harassment or fraud should also be reported promptly to law enforcement.