RBI’s New Co-Lending Rules Effective January 2026, Mandate Escrow Accounts, Risk-Sharing

Mumbai, Aug 11 (KNN) The Reserve Bank of India (RBI) has released its final guidelines for co-lending, which will be effective from January 1, 2026.

The rules aim to improve transparency, risk-sharing, and borrower protection in partnerships between banks and non-banking financial companies (NBFCs).

However, industry experts believe these norms will also raise operational costs for lenders, especially smaller NBFCs.

A key change is the mandatory use of an escrow account for all transactions. Lenders must update their loan share in records within 15 days of disbursement to keep the co-lending status valid.

The guidelines also require stronger Know Your Customer (KYC) processes, detailed disclosures to borrowers, and regular internal audits.

The RBI has made it compulsory for lenders to retain at least 10% of every loan on their own books. This ensures both parties share the risk and are equally invested in the loan’s performance.

Borrowers will now be charged a blended interest rate, calculated based on the weighted average rate of all lending partners.

All fees, charges, and interest rates must be clearly mentioned in Key Fact Statements and the Annual Percentage Rate (APR) for borrowers.

This will make loan terms easier to understand and reduce the risk of hidden costs.

While these measures are expected to strengthen trust and accountability, they may discourage smaller NBFCs from participating in co-lending arrangements.

The added cost of compliance, escrow management, and technology integration could make direct lending or loan assignments more attractive alternatives for such players.

Overall, the new framework strengthens the co-lending system but also raises the bar for operational readiness in the Indian credit market.

(KNN Bureau)