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Informist, Wednesday, Apr. 9, 2025

--RBI Swaminathan: To take feedback on co-lending norms, fine tune if needed 

--RBI Malhotra: Co-lending arrangement win-win for banks, NBFCs 

--RBI Malhotra: Co-lending arrangement has helped in priority sector lending 

--RBI Malhotra: No worry on personal loan growth front in banks 

--RBI Malhotra: Banks have to be mindful of managing asset-liability 

--RBI Malhotra: Don't have any prescription for credit-deposit ratio 

MUMBAI – Co-lending arrangements between banks and non-banking financial companies have supported lending to the priority sector and the model is now ready to be extended further, Reserve Bank of India Governor Sanjay Malhora said at a post-policy press conference on Wednesday. While announcing the outcome of the Monetary Policy Committee's April meeting earlier in the day, Malhotra had said the central bank proposed to extend the guidelines on co-lending to all regulated entities and to all loans, not just priority sector loans. The draft guidelines and regulations for this would be published later in the day for public consultation, Malhotra said. 

At the press conference, he clarified that the extension was not a shift in the RBI's stance but a natural progression of a framework that had already proved beneficial. Co-lending had helped improve credit flow to underserved segments by combining the strengths of banks and NBFCs, Malhotra said. While banks offer lower interest rates, non banking financial companies have the last-mile reach. "It is a  win win for both banks and NBFCs," Malhotra said, adding that under the new proposal, even two banks could now enter into co-lending partnerships, something earlier limited to arrangements between banks and NBFCs. 

Deputy Governor Swaminathan echoed this view, saying that there was no change in the RBI's policy position on co-lending. "We are expanding the participants by extending this (co-lending) to all regulated entities. We are also thinking to expand the coverage beyond personal loans," Swaminathan said. The intent was to harmonise the framework to make it more facilitative, Swaminathan said. Public feedback would be invited on the proposed changes, and necessary refinements would be made, he added.

RBI guidelines on co-lending, introduced in 2020, allow banks to partner with registered non-bank finance companies, including housing finance companies, for joint credit provision to priority sectors, requiring both to share risks and rewards, with the NBFC retaining a minimum 20% share of the loan.

Malhotra also reminded banks of the need for sound asset-liability management. "We do no have any prescription for CD (credit-deposit) ratio there is no regulation on the same, but we do have regulations for assets-liability managment that is more important," the governor said. He emphasised that ensuring liquidity across the short, mid and long term tenures was key to maintaining stability. 

"...(banks) should have sufficuent funds..so there are no mismatches on liquidity related issues and they can look at their own assets liabilites and plan accordingly."

Addressing concerns around the rapid growth in personal loans, Malhotra said the central bank saw no signs of stress. "There is no worry on personal loans or stress loans. Our system is strong, including NBFC, banking and personal loan sector," he said.

He also defended the RBI's decision to raise the risk weights on unsecured personal loans to 125% last year, saying this wasn't a new increase but a return to pre-COVID levels. It is important to maintain a distinction between secured and unsecured loans so that the step is prudent and not something to worry about, he said.  End

Reported by Sachi Pandey

Edited by Avishek Dutta

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