RBI's co-lending rules explained: 10% retention, the blended interest rate, the 15-day booking window, 5% DLG and next-day asset classification.
In brief
- The revised RBI co-lending framework took effect on 1 January 2026. It covers co-lending arrangements among commercial banks, All India Financial Institutions and NBFCs, including housing finance companies.1
- The operative rules now appear in Part B of the Transfer and Distribution of Credit Risk Directions for each lender type, issued on 28 November 2025.12
- Both lenders must retain at least 10% of each individual loan. The borrower pays a single blended interest rate, weighted by the lenders' respective funding shares.
- The partner's share must be recorded on its books within 15 calendar days of disbursement. Miss that window and the loan remains with the originating lender.
- The originator may provide a default loss guarantee (DLG) of up to 5% of loans outstanding. If either lender classifies the borrower as SMA or NPA, the other must apply the same classification, with information shared by the end of the next working day.
A co-lending agreement can set out the funding split clearly and still leave the operations team with difficult questions. What happens when one lender changes its rate? Has the partner booked its share before the deadline? Did yesterday's classification update reach both systems?
Those questions matter in a market where NBFC co-lending assets under management had crossed ₹1.1 lakh crore as on 31 March 2025, according to CRISIL Ratings.5 New arrangements have followed the revised framework since 1 January 2026. The Reserve Bank of India first issued those rules on 6 August 2025.4
This guide looks at five provisions that require close coordination between lenders. For each, it explains the rule, walks through the relevant example and gives you a practical check to put to your co-lending system.
Where do the co-lending rules sit now?
If your policy or agreement still cites the Reserve Bank of India (Co-Lending Arrangements) Directions, 2025, it is worth reviewing that reference. The RBI issued that document on 6 August 2025.4 On 28 November 2025, it issued separate Transfer and Distribution of Credit Risk Directions for each lender type, placing the co-lending provisions in Part B.
The main provisions carry over in the same words. What has changed is the document your policies and agreements need to refer to.
| Lender | RBI reference | Co-lending provisions |
|---|---|---|
| Commercial banks | RBI/DOR/2025-26/1591 | Part B, paragraphs 96 to 126 |
| NBFCs | RBI/DOR/2025-26/3522 | Part B, paragraphs 95 to 127 |
| All India Financial Institutions | RBI/DOR/2025-26/3273 | Part B, paragraphs 94 to 125 |
Part B took effect on 1 January 2026 in each case. A lender could choose an earlier implementation date under its internal policy (paragraph 2).
Who and what is covered?
The definition centres on an ex-ante agreement: the originating lender and partner lender agree in advance to jointly fund a portfolio of loans and share revenue and risk (paragraph 100). For a bank, permitted counterparties include other commercial banks—excluding small finance banks, local area banks and regional rural banks—All India Financial Institutions, and NBFCs including housing finance companies (paragraph 96).
Not every jointly funded loan falls under Part B. Multiple banking, consortium lending and syndication are outside its scope (paragraph 98). Digital lending retains its own requirements, so a digital co-lending arrangement must comply with both sets of rules (paragraph 97).
CRISIL Ratings noted two changes when the revised framework was introduced: co-lending extended beyond priority sector loans, and the minimum retention for NBFCs fell from 20% to 10%.5
Reviewing a co-lending arrangement?
See how Rewafin connects co-lending with origination, loan management, collections and accounting.
The five provisions that take the most work
The five provisions below set out the rule, show how it works in a worked example and identify a control question for your co-lending system.
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1
Each lender keeps at least 10% of every loan
In a co-lending arrangement, a bank must "retain a minimum 10 per cent share of the individual loans in its books" (paragraph 101). The same rule applies to NBFCs under their own Directions.2 It is tested loan by loan, not as a portfolio average: holding 5% of one loan and 15% of another does not satisfy the 10% requirement.
System checkAt booking, does the system enforce the minimum share separately for every loan and for both lenders, blocking any split outside the agreed ratio?
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2
The borrower pays one blended rate
The borrower-facing rate is "the blended interest rate which is calculated as an average rate of interest derived from the interest rates charged by respective REs", weighted according to each lender's proportionate funding share (paragraph 107). Each lender sets its own rate under its internal lending policy and in light of the borrower's risk profile.
Worked exampleSuppose a ₹10,00,000 loan is funded 80% by a bank at 9.50% and 20% by an NBFC at 14.00%. (0.80 × 9.50%) + (0.20 × 14.00%) = 10.40% On the full principal, the illustrative first-year income is ₹76,000 for the bank and ₹28,000 for the NBFC, or ₹1,04,000 together—10.40% of ₹10,00,000. This is an illustrative calculation, not an amortising schedule.
A change in either lender's rate requires the blended rate to be recalculated and communicated to the borrower (paragraph 108). If the bank moves to 9.75% in this example, the blended rate becomes 10.60%. Any borrower fees or charges above the blended rate must be included in the annual percentage rate (APR) and disclosed in the Key Facts Statement (paragraph 109).
System checkWhen one lender changes its rate, does the system recompute the blended rate, send the borrower an updated communication and accrue each lender's interest at its own rate on its own share?
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3
The partner's share is booked within 15 calendar days
The arrangement must include an irrevocable commitment by the partner lender to take its share of each loan on a back-to-back basis (paragraph 111). After disbursement, both lenders must reflect their respective shares in their books without delay and "in any case not later than 15 calendar days from the date of disbursement" (paragraph 112). The originating lender may transfer the loan only to the partner identified in the ex-ante agreement and in the Key Facts Statement at sanction (paragraph 113).
Worked exampleFor a loan disbursed on 3 March, both lenders' books must show the share by 18 March. The count is in calendar days, so weekends and bank holidays within the period are included.
If the transfer is not completed within 15 calendar days, the loan remains on the originating lender's books. A subsequent transfer to another lender is possible only under the transfer of loan exposure provisions in Part A (paragraph 114). CRISIL Ratings identified a potential operational challenge for lenders using the CLM-2 model: the partner must be identified at sanction and its share taken within 15 calendar days.5
System checkDoes every disbursed loan have a running count to the 15-day deadline, an alert before it expires and an exception report once it has passed?
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4
The originator may give a default loss guarantee of up to 5%
The originating lender "may provide default loss guarantee up to five per cent of loans outstanding in respect of loans under CLA" (paragraph 122). This default loss guarantee (DLG) is governed, with necessary modifications, by the Credit Facilities Directions, which set out the default loss guarantee rules for digital lending.
Those rules were first issued in the RBI's June 2023 guidelines. They permitted a guarantee only in one of three forms: cash deposited with the lender, a fixed deposit with a scheduled commercial bank carrying a lien in the lender's favour, or a bank guarantee. The lender had to invoke it within a maximum overdue period of 120 days, and the guarantee agreement had to remain in force for at least the longest loan tenor in the portfolio.6 The current Credit Facilities Directions should be checked for the conditions applicable to the arrangement.
Worked exampleFor ₹100 crore of loans outstanding under an arrangement, the guarantee may be as much as ₹5 crore.
Fees exchanged between lenders for lending services must not contain, directly or indirectly, any element of credit enhancement or default loss guarantee unless otherwise permitted (paragraph 110). Since 13 February 2026, an NBFC may consider a default loss guarantee when determining expected credit loss provisions across all stages, subject to Ind AS, if the guarantee is integral to the contractual terms of the loan and is not recognised separately. If the guarantee is invoked and the cover falls, the NBFC must recompute its provisions.7
System checkFor each arrangement, does the system show the cap against loans outstanding, the amount invoked, the cover remaining and the 120-day invocation window for every overdue loan?
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5
Asset classification is shared by the next working day
Classification is determined at borrower level. When either lender classifies its exposure to a borrower under the arrangement as SMA or NPA because of a default in that exposure, "the same classification shall be applicable to the exposure of the other RE" (paragraph 123). The lenders therefore need a near-real-time information-sharing mechanism, "and in any case latest by end of the next working day".
Worked exampleIf the originating lender's end-of-day run on Monday classifies a co-lent account as SMA, the partner lender must receive the information by the end of Tuesday and apply the same classification to its share.
Each lender must also report its own share of the loan to the credit information companies (paragraph 121). The control objective is to prevent two lenders from reporting different statuses for the same borrower on the same loan.
System checkWhen one lender changes a classification, does the other receive and apply it automatically each day, with a record of both transmission time and application time?
See the five checks in a live system
Ask our team to walk through co-lending on Rewafin, from the funding split at sanction to daily asset classification.
What else do the Directions require?
The five provisions above are not the whole framework. The following obligations also need a clear owner and a control that can be checked.
| Requirement | Para |
|---|---|
| The credit policy must address co-lending, including an internal limit on the portfolio share covered by these arrangements, target borrower segments and partner due diligence. | 102 |
| The loan agreement must identify the customer's single point of interface. Notify the borrower in advance if that point of contact changes. | 104 |
| Disclose the details of the arrangement to the borrower in the Key Facts Statement. | 105 |
| Each lender must maintain the borrower's account separately for its own share of the loan. | 115 |
| Route all disbursements and repayments through an escrow account with a bank, which can be either lender. The agreement must set out how receipts are appropriated. | 116 |
| Include co-lent loans in the scope of internal and statutory audit at both lenders. | 117 |
| Maintain a business continuity plan so borrowers continue to receive service until repayment if the arrangement ends. | 118 |
| The partner lender may rely on the originating lender for customer identification under the KYC Directions. | 119 |
| Any transfer of co-lent loans to a third party must follow Part A and have both lenders' consent. | 124 |
| Display all active co-lending partners prominently on the lender's website. | 125 |
| In the notes to accounts, disclose the quantum of co-lending, weighted average interest rate, fees charged or paid, broad sectors, loan performance and default loss guarantee details on a quarterly or annual basis. | 126 |
What changes for bank partners in April 2027?
Commercial banks move to expected credit loss provisioning on 1 April 2027.8 A loan more than 30 days past due is presumed to move to Stage 2 unless the bank can rebut that presumption. For most loan categories, the Stage 2 minimum provision is 5%. Housing loans to individuals and gold loans have a floor of 1.50%. Our earlier article, ECL from April 2027: What Banks Must Fix in Their Loan Systems Now, covers the requirements in more detail.
For co-lending teams, this makes the daily data feed more important. A bank partner needs accurate, account-level days-past-due records well before a co-lent account reaches 90 days. Waiting until NPA classification leaves less room to assess the earlier deterioration in credit risk.
The bank amendment Directions on transfer and distribution of credit risk issued by the RBI on the same day change Part A only.9 They do not amend the co-lending provisions in Part B.
Where Rewafin fits
Rewafin includes co-lending on the same platform as loan origination, loan management, collections and accounting. Whether you are setting up an arrangement or checking an existing one, ask our team to show you how the platform handles the five system checks described here.
Frequently asked questions
When did the RBI's revised co-lending rules come into effect?
The rules took effect on 1 January 2026. A lender could implement them earlier if it chose an earlier date under its internal policy.
Are the Co-Lending Arrangements Directions, 2025 still the right reference?
The RBI first issued the framework under that title on 6 August 2025. Since 28 November 2025, the provisions have sat in Part B of the Transfer and Distribution of Credit Risk Directions for each lender type. Policies and agreements should refer to those documents.
What is the minimum share each lender must hold in a co-lent loan?
Each lender must keep at least 10% of every individual loan on its own books. The requirement applies loan by loan.
How is the blended interest rate in co-lending calculated?
Weight each lender's interest rate by its share of the funding, then add the two amounts. For example, 80% funding at 9.50% and 20% at 14.00% produce a blended interest rate of 10.40%.
What happens if the partner's share is not booked within 15 days?
The loan remains on the originating lender's books. Any subsequent transfer to another eligible lender must follow the transfer of loan exposure provisions in Part A of the Directions.
How much default loss guarantee is allowed in co-lending?
The originating lender may provide a default loss guarantee of up to 5% of loans outstanding under the co-lending arrangement.
Do both lenders have to classify a co-lent borrower the same way?
Yes. If a default in an exposure under the arrangement causes either lender to classify it as SMA or NPA, the other lender must apply the same classification to its exposure. The information must reach the other lender by the end of the next working day at the latest.
Walk through co-lending on Rewafin
Discuss your co-lending arrangements with our team and see how the platform works in a live demo.
Sources
- Reserve Bank of India (Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025, RBI/DOR/2025-26/159, 28 November 2025 (updated as on 1 October 2026), Part B. Paragraph numbers in this article refer to this document. rbi.org.in
- Reserve Bank of India (Non-Banking Financial Companies – Transfer and Distribution of Credit Risk) Directions, 2025, RBI/DOR/2025-26/352, 28 November 2025, Part B. rbi.org.in. Also reproduced at taxguru.in
- Reserve Bank of India (All India Financial Institutions – Transfer and Distribution of Credit Risk) Directions, 2025, RBI/DOR/2025-26/327, 28 November 2025, Part B. rbi.org.in
- Reserve Bank of India (Co-Lending Arrangements) Directions, 2025, RBI/DOR/2025-26/139, 6 August 2025, as reproduced by TaxGuru. taxguru.in
- CRISIL Ratings, "Revised co-lending arrangement directives to boost transparency", press release, 13 August 2025. crisilratings.com
- Reserve Bank of India, Guidelines on Default Loss Guarantee in Digital Lending, 8 June 2023, as summarised by AZB & Partners. azbpartners.com
- Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026, RBI/2025-26/210, 13 February 2026, as reproduced by TaxGuru. taxguru.in
- Reserve Bank of India (Commercial Banks – Asset Classification, Provisioning and Income Recognition) Directions, 2026, RBI/DOR/2026-27/398, 27 April 2026. rbi.org.in
- Reserve Bank of India (Commercial Banks – Transfer and Distribution of Credit Risk) Amendment Directions, 2026, RBI/2026-27/24, 27 April 2026, as reproduced by TaxGuru. taxguru.in
This article provides a general summary for information only. It is not legal, accounting or regulatory advice. Refer to the Directions for the complete requirements.
