New rules for co-lending from the Reserve Bank of India offer more clarity. However, lenders expect higher operating costs. Market experts shared this view. The central bank issued its final co-lending rules on August 6. These rules detail how to use escrow accounts for all deals. They also cover KYC compliance and loan audits.
Higher costs come from new rules. “More work is needed for compliance,” said Yashoraj Tyagi, CEO of CASHe. “This means more spending on technology and governance.” He noted mandatory escrow accounts and checks on partners. Integrating co-lending into credit policies also adds costs.
Escrow accounts create operational hurdles. This is especially true for small NBFCs. It is also a challenge for MSME and microfinance sectors. Cash payments are common in these areas.
“We must build systems for customer payments,” said Shalya Gupta, CEO of Credifin. “These systems need to handle many payment types.” This includes QR codes and UPI. Cash payers will need extra steps for tracking. This ensures compliance with escrow rules. Banks also face more complex operations. They must adjust pricing models.
Borrowers will pay a blended interest rate. This rate combines interest from both lenders. Banks anticipate smoother processes soon. Still, working with many NBFCs complicates things.
New rules may favor larger firms. Well-funded companies with good governance may dominate. “The new rules may stop smaller NBFCs from joining,” Gupta stated. “Higher compliance and tech needs raise the bar.” He believes the rules ensure risk sharing. This requires better credit checks by the main lender. It also improves the junior lender’s process.
Rules require booking loans within 15 days. This shows each lender’s share. “The 15-day funding rule will help us grow,” said a Navi Finserv spokesperson. “Banks and NBFCs with tech issues will benefit.” Extended booking times will be helpful.
The guidelines start in January. Lenders must update systems and strategies. This is needed to stay competitive.