{"id":33267,"date":"2021-07-22T12:14:57","date_gmt":"2021-07-22T06:44:57","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=33267"},"modified":"2024-10-11T11:39:46","modified_gmt":"2024-10-11T06:09:46","slug":"rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs\/","title":{"rendered":"RBI\u2019s Guidelines on the Co-Lending Model between Banks &#038; NBFCs"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The\u00a0Reserve Bank\u00a0of India has come up with a Co-Lending Model (CLM) scheme under which the banks together with\u00a0<a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFCs<\/strong><\/a>\u00a0shall provide the loans to the priority sector borrowers on the basis of prior agreement. The Co-Lending Model is an enhancement of the co-origination of loan scheme that was announced by <strong><a href=\"https:\/\/corpbiz.io\/rbi\">RBI <\/a><\/strong>in September 2018. It aims at providing greater flexibility to all the lending institutions. Let\u2019s read more about the RBI\u2019s Guidelines on the Co-Lending Model between Banks &amp; NBFCs.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs\/#What_is_the_notification_of_RBI_on_Co-Lending_Model_between_Banks_NBFCs\" >What is the notification of RBI on Co-Lending Model between Banks &amp; NBFCs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs\/#What_are_the_Guidelines_of_the_Co-Lending_Model\" >What are the Guidelines of the Co-Lending Model?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs\/#Talk_To_Expert\" >Talk To Expert<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs\/#RBIs_Guidelines_on_the_Co-Lending_Model_between_Banks_NBFCs\" >RBI\u2019s Guidelines on the Co-Lending Model between Banks &#038; NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs\/#What_are_the_Characteristics_of_the_Co-Lending_Model\" >What are the Characteristics of the Co-Lending Model?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/rbis-guidelines-on-the-co-lending-model-between-banks-nbfcs\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_notification_of_RBI_on_Co-Lending_Model_between_Banks_NBFCs\"><\/span>What is the notification of RBI on Co-Lending Model between Banks &amp; NBFCs?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nnotification was passed by RBI <strong><em>RBI\/2020-21\/63 <\/em><\/strong>on 5<sup>th<\/sup>\nNovember, 2020<strong><em>FIDD.CO.Plan.BC.No.8\/04.09.01\/2020-21<\/em><\/strong>. <\/p>\n\n\n\n<p><em><strong>The main purpose of this notification is:<\/strong><\/em><\/p>\n\n\n\n<ul>\n<li>To raise the association between the banks and NBFCs while dealing with the lending areas in the priority sectors. <\/li>\n\n\n\n<li>To create a proficient harmonisation of loans in few sectors by adopting the strategies of Government. <\/li>\n\n\n\n<li>To mitigate the crisis caused due to Covid-19 to the banks.<\/li>\n\n\n\n<li>&nbsp;To facilitate the financial institutions to afford easy credit to the borrowers from the priority sector.<\/li>\n<\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/procedure-of-nbfc-registration-in-india\/\">NBFC Registration \u2013 Know the Entire Incorporation Procedure \u200b<\/a><\/mark><\/p>\n\n\n\n<p><strong>Priority Sector<\/strong><\/p>\n\n\n\n<p>The important priority sectors of the economy as is considered by RBI are the sectors where timely and sufficient credit might not easily reach. The Priority Sector includes the following categories:<\/p>\n\n\n\n<ul>\n<li>Agriculture<\/li>\n\n\n\n<li>Housing<\/li>\n\n\n\n<li>Micro, Small and Medium Enterprises (MSMEs)<\/li>\n\n\n\n<li>Export Credit<\/li>\n\n\n\n<li>Education<\/li>\n\n\n\n<li>Start-ups<\/li>\n\n\n\n<li>Renewable Energy<\/li>\n\n\n\n<li>Social Infrastructure<\/li>\n\n\n\n<li>Miscellaneous<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Guidelines_of_the_Co-Lending_Model\"><\/span>What are the Guidelines of the Co-Lending Model?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The primary objectives of the Co-Lending Model are given as below:<\/em><\/strong><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/07\/Guidelines-of-the-Co-Lending-Model.png\" alt=\"Guidelines of the Co-Lending Model\" class=\"wp-image-33309\" width=\"414\" height=\"336\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/07\/Guidelines-of-the-Co-Lending-Model.png 998w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/07\/Guidelines-of-the-Co-Lending-Model-300x244.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/07\/Guidelines-of-the-Co-Lending-Model-768x625.png 768w\" sizes=\"(max-width: 414px) 100vw, 414px\" \/><\/figure><\/div>\n\n\n<ul>\n<li><strong><em>Improvement of Credit Flow<\/em><\/strong>:&nbsp; The government has expressed his proposal to support the rural parts of the India. As the rural sector represents the major proportion of the population in India. Therefore, the objective is to accomplish the flow of impeccable credit in the rural society and help in its growth and development.<\/li>\n\n\n\n<li><strong><em>Maximum Reach<\/em><\/strong>&#8211; The collaboration would make it possible and add the advantages from both the Non-Banking Financial Companies and the Banks. The lower cost of funds from the banks and the greater reach of the NBFC shall together make the low cost funds available to the ultimate beneficiaries.<\/li>\n\n\n\n<li><strong><em>Generating Funds<\/em><\/strong>: The objective is to generate the availability of more funds especially to the rural areas because affording loans from the public sector and financial institutions is often a difficult task for the people from rural. Therefore, banks have done the collaboration with these Non-Banking Financial Companies to generate funds to the rural area. <\/li>\n\n\n\n<li><strong><em>Sharing the risks and returns<\/em><\/strong>: Collaboration between banks and NBFCs would not only represent the improvement in lending plans but also the development of latest technologies. However, it shall also consist of distribution of various forms of risks and returns between the Banks and NBFCs which would eventually reduce the burden on them.<\/li>\n\n\n\n<li><strong><em>To boost the Relationship<\/em><\/strong>: The collaboration shall result in boosting the relationship between Bank and NBFCs and this is the reason government has come up with the scheme of co-lending model. By this scheme, the goals of both the Banks and Non-Banking Financial Companies can together be attained in harmonization. The government has introduced numerous policies to boost the alliance or relationship between the Non-Banking Financial Companies and Bank. The result of collaboration will generate more lending.<\/li>\n<\/ul>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Talk_To_Expert\"><\/span>Talk To Expert<span class=\"ez-toc-section-end\"><\/span><\/h2><div class=\"calling-person blog_cta my-4\"> \n\n  \n\n    <div class=\"row\"> \n\n        <div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-12\"> \n\n            <div class=\"d-flex flex-nowrap\"> \n\n                <div class=\"user-online\"> <img decoding=\"async\" src=\"https:\/\/corpbiz.io\/img\/user.jpg\" alt=\"corpbiz\"> <\/div> \n\n                <div class=\"user-online-details ms-3 align-self-center\"> \n\n                    <h2 class=\"text-white mt-0\"><span class=\"ez-toc-section\" id=\"RBIs_Guidelines_on_the_Co-Lending_Model_between_Banks_NBFCs\"><\/span> RBI\u2019s Guidelines on the Co-Lending Model between Banks &#038; NBFCs <span class=\"ez-toc-section-end\"><\/span><\/h2> \n\n                    <p class=\"mt-3\"><i class=\"fa fa-star\"><\/i><i class=\"fa fa-star\"><\/i><i class=\"fa fa-star\"><\/i><i \n\n                            class=\"fa fa-star\"><\/i><i class=\"fa fa-star-half-full\"><\/i><span \n\n                            class=\"ms-2 text-white\">(4.8)<\/span><\/p> \n\n                <\/div> \n\n            <\/div> \n\n          \n\n        <\/div> \n\n     \n\n        <div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-8 mx-auto\"> \n\n            <div class=\"d-flex justify-content-between call-chat\"> <a href=\"tel:919121230280\"> <span>Call Now \n\n            <\/span><img decoding=\"async\" class=\"ms-2\" src=\"https:\/\/corpbiz.io\/admin\/style\/images\/userfiles\/image\/new_call_icon.png\" \n\n                alt=\"Call With \" width=\"32px\"> \n\n        <\/a> <a href=\"https:\/\/api.whatsapp.com\/send?phone=919289379709&amp;text=Hi, I am Looking For FSSAI Basic.\" target=\"_blank\" rel=\"noopener\"> <span>Chat With Us<\/span><img decoding=\"async\" class=\"ms-2\" \n\n                src=\"https:\/\/corpbiz.io\/img\/chat-with-expert.png\" alt=\"Chat With \" width=\"32px\"> <\/a> <\/div> \n\n        <\/div> \n\n    <\/div> \n\n<\/div> \n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Characteristics_of_the_Co-Lending_Model\"><\/span>What are the Characteristics of the Co-Lending Model?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nReserve Bank of India has introduced the co-lending scheme to increase and enhance\nthe lending terms between both the Banks and the Non-Banking Financial\nCompanies. The major characteristics of the co-lending model are given below:<\/p>\n\n\n\n<ul>\n<li><strong><em>Systems<\/em><\/strong>: The banks and the Non-Banking Financial Company (NBFC) have to make sure that there are efficient systems placed to implement the measures on Anti-Money Laundering and Due Diligence.<\/li>\n\n\n\n<li><strong><em>Clients<\/em><\/strong>: It is the responsibility of the Non-Banking Financial Companies to deal and negotiate with the clients. <\/li>\n\n\n\n<li><strong><em>Master Agreement<\/em><\/strong>: The master agreement would be the contract entered between the bank and NBFC. <\/li>\n\n\n\n<li><strong><em>Warranties and Representations<\/em><\/strong>: All agreements with the terms of the co-lending model shall contain the representations and warranties which must be according to the pre-negotiated terms and conditions between Non-Banking Financial Companies and banks.<\/li>\n\n\n\n<li><strong><em>Internal Audit<\/em><\/strong>: It is important to comply with the internal and external audit guidelines between the banks and NBFC regarding the type of loans that shall be offered under the co-lending scheme.<\/li>\n\n\n\n<li><strong><em>Security<\/em><\/strong>: The NBFC and bank together shall decide the terms regarding the security creation in the co-lending model.<\/li>\n\n\n\n<li><strong><em>Business Continuity<\/em><\/strong>: The provisions regarding the co-lending agreement should not have any effect on the regular business which is preserved between the banks and NBFCs with the clients.<\/li>\n\n\n\n<li><strong><em>Approval<\/em><\/strong>: All the information\u2019s of the co-lending model should mandatorily be disclosed to the clients and must be approved by them. The client can also submit their complaints to the&nbsp;<strong><em>Customer Education and Protection Cell<\/em><\/strong> in the Reserve Bank of India.<\/li>\n\n\n\n<li><strong><em>Loans Recovery<\/em><\/strong>: The co-lending scheme would have the relevant arrangement pertaining to the recovery of the loans from clients. <\/li>\n\n\n\n<li><strong><em>Promoter Groups<\/em><\/strong>: In this co-lending model, banks are not permitted to enter any other co-lending regime, where the Non-Banking Financial Company has directly managed through a promoter group.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong><em>Reserve Bank of India<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Reserve_Bank_of_India\"><strong><em>[1]<\/em><\/strong><\/a><\/sup> (RBI) has introduced the Co-lending model scheme by collaborating between the Banks and the NBFCs. Hence, it is important in this agreement that all the terms should be in compliance as has been agreed with the parties so as to fulfill the objective of providing the loans to the priority sector borrowers on the basis of prior agreement.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/step-by-step-nbfc-registration-procedure\/\">NBFC Registration: Step by Step Procedure <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The\u00a0Reserve Bank\u00a0of India has come up with a Co-Lending Model (CLM) scheme under which the banks together with\u00a0NBFCs\u00a0shall provide the loans to the priority sector borrowers on the basis of prior agreement. The Co-Lending Model is an enhancement of the co-origination of loan scheme that was announced by RBI in September 2018. It aims at [&hellip;]<\/p>\n","protected":false},"author":33,"featured_media":33307,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[1874],"acf":{"service_id":"8"},"authorName":"Kandarp Vanita","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/image_2021_02_01T09_09_44_024Z.png","authorDescription":"Kandarp Vanita has done masters in Corporate and Commercial Law from WB National University of Juridical Sciences. She has 3 yrs of experience in drafting legal documents &amp; dissertations. Being a curious reader, she is also passionately into providing legal backups and comprehensive understandings in every aspect of Law to the firms.","postViews":6231,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/33267"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/33"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=33267"}],"version-history":[{"count":19,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/33267\/revisions"}],"predecessor-version":[{"id":66803,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/33267\/revisions\/66803"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/33307"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=33267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=33267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=33267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}