RBI Issues Final Co-Lending Arrangements Directions, 2025

Posted On - 19 September, 2025 • By - King Stubb & Kasiva

On August 06, 2025, the Reserve Bank of India (RBI) issued the Co-Lending Arrangements Directions, 2025 under Notification No. RBI/DOR/2025-26/139[1]. These Directions will come into effect from January 1, 2026, unless adopted earlier by regulated entities. The objective is to expand the scope of co-lending and strengthen prudential as well as conduct standards in such arrangements.

Who is Covered?

The Directions apply to:

  • Commercial banks (other than small finance banks, local area banks, and regional rural banks),
  • All-India Financial Institutions, and
  • NBFCs (including Housing Finance Companies).

Digital lending remains separately governed by the RBI Digital Lending Directions, 2025, but digital platforms involved in co-lending must also comply with these new rules.

Under the framework, each lending partner must retain at least 10% of every loan on its own books. Borrower agreements are required to clearly disclose the role of each lender, the grievance redressal mechanism, and the customer interface. Credit policies of regulated entities must also incorporate co-lending specific provisions. Priority sector lending benefits will apply proportionately to lenders, based on their participation.

Borrowers will be charged a blended interest rate, calculated as the weighted average of the rates charged by participating lenders. Any additional charges must be transparently disclosed in the Key Facts Statement (KFS). Fees for lending services must be fair and transparent and cannot involve prohibited elements such as implicit credit enhancements or unauthorized guarantees.

Operationally, lending partners must irrevocably commit to their share of loans, which must be reflected in their books within 15 (fifteen) days of disbursement. Loan funds will be routed through an escrow account, and all arrangements will remain subject to internal and statutory audits. Regulated entities must ensure compliance with KYC norms and have in place adequate business continuity measures.

The framework also allows originating lenders to provide a Default Loss Guarantee (DLG) of up to 5% of outstanding loans under a co-lending arrangement. Importantly, asset classification will be at the borrower level meaning that a default with one lender will impact the classification of the borrower’s account across all lenders under the arrangement.

In terms of transparency, lenders are required to disclose details of active co-lending partnerships on their websites as well as in their financial statements, covering loan volumes, interest rates, fees, sectors, and performance. With the introduction of these new Directions, the earlier co-lending framework for priority sector lending, issued in November 2020, stands repealed.

[1] https://rbidocs.rbi.org.in/rdocs/notification/PDFs/139MDBC1C6C3662194F5DB74A31255E5134F3.PDF