RBI Imposes 10% Loan Retention Rule

RBI Imposes 10% Loan Retention Rule in Co-Lending: Strengthening Risk Sharing in Lending

by
Spread the love

RBI Imposes: The Reserve Bank of India (RBI) has finalised its updated Co-Lending Arrangements (CLA) framework, which will be implemented from January 1, 2026. The new guidelines are designed to increase accountability, improve transparency, and reduce lending risks for banks, NBFCs, and other regulated financial institutions. RBI Imposes 10% Loan Retention Rule in Co-Lending: Strengthening Risk Sharing in Lending.

RBI Imposes 10% Loan Retention Rule

Key Provisions in the Revised Co-Lending Rules

  • Mandatory 10% Loan Retention
     Under the revised rules, every participating lender in a co-lending deal must keep at least 10% of the loan on its own books. This ensures that all partners in the lending arrangement share the risk equally and have a vested interest in the borrower’s repayment performance. RBI Imposes 10% Loan Retention Rule in Co-Lending: Strengthening Risk Sharing in Lending.
  • Wider Participation
     The new framework expands participation beyond banks and NBFCs to include housing finance companies, select financial institutions, and all commercial banks (except small finance banks). This broadens credit accessibility across more sectors. RBI Imposes 10% Loan Retention Rule in Co-Lending: Strengthening Risk Sharing in Lending.
  • Faster Loan Transfer
     The originating lender must transfer its share of the loan to the co-lender within 15 days of disbursement. If this is not done, the loan will not qualify as a co-lending transaction.
  • Unified Borrower-Level Asset Classification
     If any co-lending partner categorises a borrower as being under financial stress—such as being tagged under SMA (Special Mention Account) or NPA (Non-Performing Asset)—all partners must record it in the same way. This creates uniformity in risk recognition.
  • Blended Interest Rate & Clear Disclosures
     Borrowers will be charged a blended interest rate based on each lender’s share. All applicable fees must be included in the Annual Percentage Rate (APR) and disclosed transparently in the Key Facts Statement.
  • Robust Safeguards
     Co-lending agreements must now outline clear responsibilities, set up grievance redressal systems, specify escrow account usage, prepare business continuity plans, and provide details of all active partners.

RBI’s Recent Actions on Digital Lending Apps

Alongside the co-lending reforms, the RBI has tightened oversight of digital lending apps (DLAs) to protect borrowers from illegal and predatory practices. RBI Imposes 10% Loan Retention Rule in Co-Lending: Strengthening Risk Sharing in Lending.

  1. Mandatory Centralised Reporting
     Since May 13, 2025, all regulated entities must report their DLAs to the RBI via the Centralised Information Management System (CIMS). Initial submissions were required by June 15.
  2. Public List of Legal Apps
     In July 2025, the RBI published a verified list of about 1,600 legal DLAs on its website. This allows consumers to check whether an app is legitimate before borrowing. The list includes authorised platforms like Google Pay, Paytm, PhonePe, LendingKart, and others.

These measures aim to increase transparency, stop fraudulent lending operations, and ensure borrowers’ rights are safeguarded. RBI Imposes 10% Loan Retention Rule in Co-Lending: Strengthening Risk Sharing in Lending.

Why These Reforms Are Important

  1. Improved Risk Sharing – With mandatory loan retention, all lenders have a financial stake in the loan’s outcome.
  2. Better Credit Access – Expanding participation to more institutions means more borrowers—especially small businesses and individuals—can access loans.
  3. Standardised Practices – Uniform loan classification helps avoid confusion and enables quicker corrective action.
  4. Safer Digital Lending – Publishing a list of approved apps empowers borrowers to avoid scams.

Overall, these regulatory updates demonstrate the RBI’s focus on building a safer, fairer, and more transparent lending ecosystem for both traditional and digital borrowers. RBI Imposes 10% Loan Retention Rule in Co-Lending: Strengthening Risk Sharing in Lending.

Read Also

Disclaimer: This article is for informational purposes only and does not constitute financial advice. We do not promote or endorse any specific loan app. Always verify that a loan app is partnered with an RBI-registered NBFC or bank before applying. Be cautious of fraudulent applications that may misuse your personal data, charge hidden fees, or engage in unethical debt collection practices. Before borrowing, read the loan agreement carefully, compare interest rates, and ensure you can repay the loan within the agreed tenure. Avoid downloading loan apps from unofficial sources or unknown websites. In case of any suspicious activity or harassment by a loan app, report it immediately to the Reserve Bank of India or the National Cyber Crime Reporting Portal (https://cybercrime.gov.in/). Borrow responsibly — only take a loan if it is truly necessary and you are confident in your ability to repay on time.

Leave a Comment