Co-lending may be expanded beyond priority sector loans

The Reserve Bank of India on Wednesday proposed to expand the scope for co-lending beyond priority sector loans, and issue a generic regulatory framework for all forms of such arrangements among banks and NBFCs, with a view to cater to the credit needs of a wider segment in a sustainable manner.

- PRESS TRUST OF INDIA

The extant guidelines on co-lending are applicable only to arrangements between banks and NBFCs for priority sector loans.

Co-lending arrangement (CLA) refers to an arrangement formalized through an ex ante legal agreement, among the permitted regulated entities (REs) to jointly fund a loan portfolio in a pre-agreed proportion, involving revenue and risk sharing.

The regulated entities (REs) enter into several co-lending arrangements (CLAs), apart from sourcing arrangements, for extension of credit to the borrowers.