New co-lending norms may reduce bank and NBFC volumes in near term

RBI's new co-lending norms may shrink volumes in the short term as NBFCs face tech, cost and compliance hurdles - but lenders expect long-term growth once systems adapt

Banks and non-banking financial companies (NBFCs) expect Reserve Bank of India’s (RBI) new guidelines on co-lending to reduce volumes in the near term due to operational challenges as one of the stipulated norms calls for transferring a loan within 15 days of its origination.

 

According to market participants, the size of co-lending books is expected to shrink sharply in the short run, particularly for smaller NBFCs. They said that the new rules could increase operational costs for lenders, who will now need to maintain mandatory escrow accounts, comply with stricter know-your-customer (KYC) norms, and invest in upgraded technology integration. Smaller