Assurance Gazette – August 2025 Edition

Welcome to the Assurance Gazette for August 2025 Edition. This edition provides an overview of the Reserve Bank of India (Co-Lending Arrangements) Directions, 2025 (the “Co-lending Directions”), issued on August 6, 2025. These new directions aim to provide specific regulatory clarity on the permissibility of co-lending arrangements (CLA) while addressing prudential and conduct-related aspects. This edition analyses the key provisions, their implications, and the necessary steps for compliance. In this edition we also brings you highlights of the revised Technical Guide on Accounting for CSR Expenditure (July 2025) by ICAI’s CL&CGC incorporating recent amendments and clarifications, offering practical insights into recognition, presentation, and disclosure. With FAQs, it serves as a vital resource to ensure compliance, transparency, and effective CSR reporting aligned with national development priorities

Introduction

The RBI has issued new, comprehensive directions on co-lending arrangements to broaden their scope and provide a clear regulatory framework. These directions will come into effect on January 1, 2026, or an earlier date chosen by a Regulated Entity (RE) as per its internal policy. Any new CLA entered into after the effective date must comply with these directions.

Main Content

Applicability

The Co-lending Directions are applicable to:

• Commercial Banks (excluding Small Finance, Local Area, and Regional Rural Banks),
• All-India Financial Institutions, and
• Non-Banking Financial Companies (including Housing Finance Companies)

Note: These directions shall not apply to loans sanctioned under multiple banking, consortium lending, or syndication.

General Guidelines

A key provision is that each RE in a CLA must retain a minimum 10% share of the individual loans on its books. The credit policy of RE’s must cover CLAs, including portfolio limits, target segments, partner due diligence, and provisions for customer service and grievance redressal.

The agreement between co-lending partners must detail the terms and conditions, borrower selection criteria, and a mechanism for grievance redressal. The loan agreement with the borrower must clearly disclose the segregated roles of the REs and identify the entity that serves as the single point of contact for the customer. Any change in the customer interface requires prior intimation to the borrower.

Regulated Entities must provide borrowers with complete CLA details in line with RBI’s Key Facts Statement for Loans & Advances guidelines and can classify their share of eligible CLA loans as priority sector lending under the applicable RBI Master Directions.

NBFCs shall adhere to the applicable accounting standards, while booking of unrealised profit under CLAs, if applicable. However, such profits, shall be deducted from Common Equity Tier 1 capital or net owned funds for meeting regulatory capital adequacy requirement till the maturity of such loans.