Co-lending
Co-lending is an arrangement where two or more lenders fund the same loan in a fixed ratio, sharing risk and return on a per-loan basis.
- One borrower receipt
- Allocate under the agreement
- Separate partner ledgers
A ten lakh rupee loan funded 70:30 by a bank and an NBFC, a ratio chosen for the example rather than set by any rule. An EMI of 25,000 rupees lands in the escrow account. The platform allocates it to interest and principal on the blended schedule, splits each component 70:30 into the two lenders' ledgers, applies each lender's own rate to its own share, and writes one settlement entry against the escrow account. If the borrower later turns SMA-1 on the NBFC's book, the bank's share carries the same status the next working day. The MIS both partners read is a report over those postings, not a reconciliation of them.
The model is most prominent in India, where the Reserve Bank of India's Co-Lending Arrangements Directions, 2025 replaced the 2020 priority-sector framework from 1 January 2026. Each co-lender keeps at least 10 per cent of every individual loan on its own books. Disbursements and repayments run through an escrow account with a bank. Classification is borrower-level within the arrangement: a default in the co-lent exposure that makes one lender classify it SMA or NPA carries the same status onto the other lender's share, and the information passes between them by the end of the next working day at the latest. What the 2025 Directions change after disbursal covers the servicing work this creates. Each lender reports its own share to the credit bureaus. The Directions now sit inside RBI's consolidated NBFC directions on transfer and distribution of credit risk. Outside India the closest equivalents are loan participations and forward-flow arrangements, where one lender originates and another holds part or all of the exposure.
Operationally, co-lending is a servicing problem more than an origination one. Every repayment has to be split in the agreed ratio, interest accrues at two rates on two books, charges and waivers need a rule for who bears them, and the partner MIS has to reconcile to each lender's ledger at month end. A lender running co-lending on a single-tenant LMS spends its reporting cycle in spreadsheets. A platform that models the partnership as a first-class entity in its data model does the split at posting time instead. See co-lending in the embedded finance stack for how that looks in practice.
See co-lending in the digital lending platform for embedded finance →