← Policy & Regulation: Financial & market regulation (all topics)
Co-lending & digital lending norms
What it is
Co-lending lets a bank and NBFC share a loan, with the NBFC originating and servicing while the bank funds most of the principal. Digital lending guidelines make the regulated entity accountable for its lending service providers
The NBFC contributes reach and underwriting; the bank contributes cheap funding
Impact on industries
- Solves the NBFC's funding disadvantage directly - bank money at bank cost funds loans the bank could not originate itself
- Capital-light for the originator, since most of the loan sits on the bank's balance sheet while the NBFC earns fee and spread
- Counterparty risk runs both ways - the originator's underwriting standards and fraud controls become the bank's problem
- Digital lending norms make the entity accountable for sourcing partners, raising oversight cost - while cross-sell remains the cheapest acquisition available