Published on Oct 17, 2025Updated on Nov 7, 2025
The Reserve Bank of India (RBI) has issued new RBI co-lending guidelines that will come into effect from January 1, 2026. These rules have been designed to bring more clarity, transparency, and fairness to how banks and NBFCs (Non-Banking Financial Companies) work together in offering loans. While co-lending is not a new concept, the revised framework makes it more structured, ensuring that both lenders share risk and responsibility in a more balanced way.
The updated rules apply to commercial banks, NBFCs, All-India Financial Institutions, and other regulated entities that are part of co-lending arrangements.
Borrowers may wonder whether this may change the way credit products, such as personal loans, are offered and managed. In the following sections, we will look at the main provisions of the framework and understand what they could mean for individuals seeking personal loans in the future.
Must Read: 6 Easy Ways to Increase Your Personal Loan Eligibility
Banks and NBFC co-lending is a model where both types of lenders come together to provide loans to customers. RBI’s co-lending model allows both parties to combine their strengths and offer borrowing solutions with larger amounts, competitive loan pricing, and wider reach to underserved areas, thereby enhancing financial inclusion.
Borrower protection is also a key aspect of this lending partnership. Customers benefit from the combined expertise of both entities, greater transparency in loan servicing, and access to a wider range of loan products.
The RBI announced new co-lending rules in India in 2025, which will take effect from January 2026. Here are the key highlights:
The loan agreement must clearly specify the allocation of responsibilities – such as sourcing and loan servicing – between the REs, and identify a single point of contact for the borrower for the entire loan tenure. Any modifications in the customer interface should be communicated to the borrower in advance.
The new guidelines mandate blended interest rates, which means the borrower will be charged a single weighted rate that combines the contributions of both lenders. This makes loan pricing more transparent and prevents hidden charges or discrepancies between what different lenders quote.
Under the updated framework, both banks and NBFCs must retain at least 10% of every loan on their own books. This strengthens risk sharing between lenders.
If one lender classifies a borrower’s account as a default, the other partner must do the same. This prevents regulatory arbitrage and ensures consistency in how defaults are treated across lenders.
The rules require co-lending agreements to specify the role of each lender clearly – whether in sourcing, servicing, or grievance redressal.
All transactions must now pass through an escrow mechanism to ensure fairness and proper allocation between lenders. In addition, the new settlement timeline requires that the partner lender’s share of the loan be transferred within 15 days of disbursement. If this 15-day settlement deadline is missed, the entire loan remains with the originating lender.
The revised framework also limits the First-Loss Default Guarantee (FLDG) that one lender can provide to the other. The cap is set at 5% of the outstanding loan amount.
The updated loan risk-sharing rules in India are designed to make lending more transparent and balanced. A direct impact on personal loan borrowers is greater clarity on repayments and charges. Since all transactions will be routed through a co-lending escrow account, the flow of funds between lenders becomes more transparent, which reduces the chance of disputes and delays.
Further, improved credit reporting in co-lending ensures that repayment behaviour is accurately captured, helping borrowers build or maintain a healthy credit score.
To make the most of the new co-lending framework, borrowers are advised to maintain a strong credit score, a stable income source, and low existing obligations to benefit from smoother approvals and competitive personal loan interest rates.
Further, using tools like a personal loan eligibility calculator can give clarity on where you stand and how to improve your application.
The revised RBI co-lending rules are ultimately designed to give borrowers more transparency, fairer pricing, and stronger protection when availing of credit. For anyone planning to take a personal loan, this means clearer agreements and greater confidence that responsibilities between lenders are well defined.
If you’re exploring financing solutions, SMFG India Credit offers personal loans of up to INR 30 lakhs* with interest rates starting from just 13%* per annum. Use our personal loan EMI calculator to estimate your monthly obligations and apply online today!
* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us
It is a model where two lenders jointly fund and service a personal loan, sharing risks and responsibilities.
Your loan will carry a single blended interest rate, combining the rates of both lending partners.
You will have a single point of contact defined in the agreement for all loan servicing needs.
Transparency in pricing and blended rates could make personal loans more competitive, though the final rate depends on your eligibility and credit profile.
A missed EMI will be reported as a default by both lenders under borrower-level classification.
Yes, repayment history from co-lending is reported to bureaus, impacting your credit score.
If one lender marks your account as NPA, all co-lending partners must classify it the same way.
They ensure you pay one fair, transparent interest rate instead of multiple lender rates.
Yes, clear role definitions make grievance redressal more streamlined and borrower-friendly.
The new RBI co-lending guidelines will take effect from 1 January 2026, with standardised personal loan documents outlining terms.
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