Definition
Co-lending Model
Co-lending is an RBI-permitted arrangement where a bank and an NBFC jointly fund a loan to a borrower, combining the bank's low-cost funds with the NBFC's reach.
Under the co-lending model, a bank and an NBFC together extend a single loan, sharing the funding and the risk in agreed proportions. The NBFC typically originates and services the borrower while the bank provides the bulk of low-cost capital.
RBI's framework, often called CLM, aims to improve credit flow to underserved segments — like priority-sector borrowers, small businesses and rural customers — by leveraging each partner's strengths.
For borrowers it can mean wider access and competitive rates; the arrangement specifies who handles collection, servicing and grievance redressal, with both lenders bound by applicable RBI norms.
Related terms
- Digital Lending GuidelinesRBI's Digital Lending Guidelines are rules that govern app- and platform-based lending in India to ensure transparency, fair practices and protection of borrowers' data.
- Embedded FinanceEmbedded finance is the integration of financial services — payments, credit, insurance — directly inside non-financial apps and platforms, at the point of need.
- First Loss Default Guarantee (FLDG)FLDG is an arrangement where a lending partner, like a fintech, agrees to absorb initial losses on a loan portfolio up to a capped percentage, sharing credit risk with the lender.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.