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The new Co-Lending Arrangements Directions cut minimum retention from 20% to 10%, but replaced the old margin-arbitrage model with a single blended rate — and expanded scope well beyond priority sector lending. CS Chetna Shoor structures your CLA agreement and blended-rate mechanics to the current rules.
The RBI (Co-Lending Arrangements) Directions, 2025, notified on August 6, 2025 and effective January 1, 2026, replaced the November 2020 Co-Lending Guidelines, which had applied only to priority sector lending. The new framework covers co-lending across all lending activity between scheduled commercial banks and NBFCs, including HFCs, and changes the underlying economics meaningfully: minimum retention per regulated entity has been reduced from 20% (previously required of NBFCs) to 10% for each partner, but borrowers must now be charged a single blended interest rate — a weighted average of both partners’ rates — replacing the earlier Hurdle Rate model that let an NBFC price above a bank’s lower cost of funds and retain the margin.
This page is for NBFCs setting up a new co-lending partnership with a bank, or restructuring an existing priority-sector arrangement to meet the expanded 2025 scope. Chetna structures the CLA agreement, the blended-rate calculation methodology, and the asset classification mirroring protocol the Directions require, working directly with your banking partner’s team.
Each RE (bank and NBFC) must retain at least this share of every individual loan on its own books
Maximum time for back-to-back transfer of the partner RE's share
Weighted average of both REs' rates, replacing the older Hurdle Rate margin model
Maximum permitted Default Loss Guarantee within a co-lending arrangement
Scope expanded beyond priority sector lending under the 2020 framework
Legal basis, effective January 1, 2026
Under the old Hurdle Rate approach, an NBFC could price above a bank's lower cost of funds and keep the spread. The mandatory blended rate removes that arbitrage entirely, meaning co-lending economics need to be re-modeled around the new pricing mechanism — not assumed to work the same way they did under the 2020 framework.
If one regulated entity marks a loan NPA, the other must mirror that classification immediately. This means both partners' loan management systems need to communicate in near real time, not reconcile periodically — a technical integration challenge as much as a compliance one.
The 2025 Directions apply well beyond the priority-sector lending the 2020 guidelines covered, so existing co-lending arrangements built for priority-sector-only compliance likely need restructuring even if the underlying partnership itself isn't changing.
Co-lending is one route to combining reach and cost of funds — worth confirming it’s the right one for your situation.
Fits if you want to combine your origination and reach with a bank's lower cost of funds, sharing risk on a defined retention basis under a formal CLA.
Fits if you're partnering with a technology platform rather than another regulated lender for origination. See our Digital Lending Setup & Compliance service — note that digital co-lending arrangements are governed by both frameworks together.
Worth confirming co-lending's operational complexity — mirrored asset classification, blended-rate systems — is genuinely worth it versus lending entirely on your own balance sheet.
We review the retention split, blended-rate mechanics, and your banking partner's existing framework to confirm what needs to change.
The Co-Lending Agreement drafted fresh or restructured against the 2025 Directions.
Calculation methodology finalized for the blended rate, APR, and Key Facts Statement disclosure.
Default Loss Guarantee structuring, if applicable, and the asset classification mirroring protocol designed between systems.
Agreement negotiation support with your banking partner, and direct handling of any RBI queries that arise.
The retention, pricing, and classification mechanics need ongoing discipline, not just correct setup at launch.
Ongoing retention and blended-rate compliance monitoring across the loan book.
Continued asset classification mirroring discipline between both regulated entities.
Coordination with your broader NBFC compliance program. See NBFC Annual RBI Compliance.
Periodic review as RBI's co-lending framework continues to evolve.
CS Chetna Shoor’s team replies within 4 hours on WhatsApp.
A co-lending arrangement (CLA) is a structured partnership where a bank and an NBFC jointly finance the same loans, sharing risk on a defined retention basis and combining the bank’s lower cost of funds with the NBFC’s origination reach. RBI’s 2025 Co-Lending Arrangements Directions govern this across all lending activity, not just the priority sector lending the earlier 2020 guidelines covered.
Each regulated entity — bank or NBFC — must retain a minimum of 10% of every individual loan on its own books, down from the 20% NBFCs were required to retain under the 2020 guidelines. The partner entity’s share must be transferred on a back-to-back basis within 15 calendar days of origination.
A blended interest rate is a single rate charged to the borrower, calculated as the weighted average of each co-lending partner’s individual rate. RBI mandated this to replace the earlier Hurdle Rate model, which allowed an NBFC to price above a bank’s lower cost of funds and retain the resulting margin — the blended rate removes that arbitrage and standardizes borrower pricing.
No. The 2025 Co-Lending Arrangements Directions expanded the framework to cover all lending activity between scheduled commercial banks and NBFCs, not just priority sector loans as the 2020 guidelines required. This means co-lending arrangements built solely for priority-sector compliance likely need restructuring to reflect the broader current scope.
RBI requires unified, mirrored asset classification across both regulated entities — if one partner marks the loan non-performing, the other must mirror that classification immediately, rather than applying its own independent timeline. This requires close coordination between both partners’ loan management systems to keep classifications synchronized in practice, not just on paper.
Qualified Company Secretary · ICSI Member · Founder, Expertvuw Management Pvt Ltd
Chetna has guided NBFC promoters through RBI’s COR process end to end, with particular focus on structuring the Net Owned Fund and business plan so the application survives first-round RBI scrutiny rather than coming back with a query.