India’s New Co-Lending Rules: Will Your Personal Loan Get Cheaper & Faster?

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Introduction: A New “Team-Up” for Your Loan

 

Hello, and welcome to Fiknow!

If you are looking for a personal loan, you may have started to hear a new, confusing word: “Co-Lending.”

What is this? Is it a new type of loan? Is it a new company?

Don’t worry. This is your complete, simple guide. We will explain everything.

In simple words, “co-lending” is a “team-up.”

Think of it like this:

  • A big, rich Bank (like SBI or HDFC)

  • …teams up with…

  • A fast, modern NBFC (like Bajaj Finserv, Muthoot Finance, or a new FinTech app)

Together, they “join hands” to give you one single loan.

But why are they doing this? And more importantly, what does this “team-up” mean for you? You just want a loan. Will this make your personal loan cheaper? Will it make the approval faster?

The answer to both questions is YES.

The Reserve Bank of India (RBI) has made new rules for this “team-up.” These new rules are designed to protect you, the borrower, and to make loans better for everyone.

This is a long, detailed guide. We will explain what co-lending is with a simple story, why the RBI made new rules, and what it means for your wallet and your watch.

A Very Important Note (Disclaimer): We at fiknow.com are here to give you knowledge. This article is for information and education only. It is NOT financial advice. A loan is a big responsibility. Please read all loan documents from the bank and the NBFC very carefully before you sign.

Let’s begin.

Part 1: What is Co-Lending? (A Simple Story)

 

To understand co-lending, let’s first look at the “old way” of getting a loan.

The “Old Way” (Two Separate Shops)

For many years, there were two very different “shops” to get a loan from:

Shop 1: The Big Bank (Your “Rich Uncle”)

  • Who: Big, old banks like State Bank of India, PNB, etc.

  • Pros: They have lots of money. This means they can give you a loan at a very low interest rate (e.g., 10% per year).

  • Cons: They are very slow. They have old computer systems. They ask for many documents. They have strict rules. If your CIBIL score is not perfect, they will say “No.” They also don’t have branches in every small village.

Shop 2: The NBFC (Your “Smart, Fast Friend”)

  • Who: Companies like Bajaj Finserv, or a new “FinTech” loan app on your phone.

  • Pros: They are super-fast! They have great apps. They use new technology. They can approve your loan in 5 minutes. They are also more flexible with rules and might approve you even if your CIBIL is just “average.”

  • Cons: They have less money, and their money is more expensive. This means they charge a very high interest rate (e.g., 18% or 24% per year).

So, in the old way, you had to choose:

  • Do I want a cheap loan that is slow? (Go to the Bank)

  • Or do I want a fast loan that is expensive? (Go to the NBFC)

The “New Way” (The Co-Lending Team-Up)

The RBI saw this problem. They created “Co-Lending” to give you the best of both worlds.

Let’s go back to our story.

  • Your “Rich Uncle” (the Bank) has lots of cheap money but is slow.

  • Your “Smart Friend” (the NBFC) is very fast but has expensive money.

They decide to team up and open one shop together.

  • The Bank says, “I will put in 80% of the money for every loan.”

  • The NBFC says, “Great! I will put in 20% of the money. And I will use my fast app to find customers and approve them in 5 minutes.”

Now, when you go to this “new shop” (the co-lending app):

  1. You get the super-fast 5-minute approval from your “Smart Friend” (the NBFC).

  2. But the loan you get is made up of 80% “cheap money” from your “Rich Uncle” (the Bank).

The Result: You get a loan that is almost as fast as an NBFC loan, but almost as cheap as a bank loan.

This is co-lending. It is a win-win-win.

  • The Bank gets new customers from small towns without building new branches.

  • The NBFC gets to offer cheaper loans, so more people will take loans from them.

  • You (the Borrower) get a faster, cheaper, and easier loan.

Part 2: Why Did the RBI Make New Rules? (Keeping You Safe)

 

This “team-up” sounds perfect, right? But it had two big dangers. The RBI made new rules to fix these dangers.

Danger 1: The “Reckless Driving” Problem

  • The Problem: The “Smart Friend” (NBFC) was only putting in 20% of the money. The “Rich Uncle” (Bank) was putting in 80%.

  • The NBFC might think, “It’s not my money, so who cares? I will give loans to everyone, even very risky people. If they don’t pay, it’s the Bank’s loss, not mine.”

  • This is called “reckless lending.” It is very dangerous for the whole country’s economy.

The RBI’s New Rule (The “Skin in the Game” Rule): The RBI said, “From now on, the NBFC must keep at least 20% of the loan on its own books.” This means the NBFC is forced to share the risk. Now, the NBFC will also be very careful. It will check your CIBIL and your salary properly before approving.

  • What this means for you: The loan you get is safer and more responsible. The NBFC is not just “selling” you a loan; it is an “investor” in your loan.

Danger 2: The “Who Do I Call?” Problem

  • The Problem: You took one loan, but two companies are involved.

  • What if you have a problem? Who do you call? The Bank or the NBFC?

  • What if your EMI is cut, but your app doesn’t show it? The Bank will say, “Talk to the NBFC.” The NBFC will say, “Talk to the Bank.”

  • This is a nightmare for the customer.

The RBI’s New Rule (The “Single Point of Contact” Rule): The RBI made a very clear rule. The NBFC (the “Smart Friend” you signed up with) must be the single point of contact for you, the borrower.

  • The NBFC must handle all your customer service, from the start of the loan to the very last EMI.

  • The NBFC must also have a clear “Grievance Redressal Officer” (the complaint department) for you.

  • What this means for you: You have one phone number to call for everything. The Bank and NBFC will sort out their problems in the background. You will not be stuck in the middle.

These new rules are designed to make co-lending safe, transparent, and fair for you.

Part 3: The Big Question: Will My Loan Be CHEAPER?

 

Yes. This is the biggest and best benefit for you. A co-lending loan should be significantly cheaper than a normal NBFC loan.

It’s because of something called a “Blended Interest Rate.”

Let’s do some very simple math.

The Old Way (NBFC only):

  • You want a ₹1,00,000 personal loan.

  • You go to a fast NBFC app.

  • The NBFC’s own cost of money is high, so they charge you 18% interest.

  • Your EMI (for 3 years): ₹3,615

  • Total Interest Paid: ₹30,140

The New Way (Co-Lending):

  • You want a ₹1,00,000 personal loan.

  • You go to the same fast NBFC app. But now, it has a “team-up” with a Bank.

  • The loan is split:

    • ₹80,000 (80%) comes from the Bank at a low rate of 9%.

    • ₹20,000 (20%) comes from the NBFC at a high rate of 18%.

  • The app “blends” these two rates to give you one final rate.

  • This “blended rate” will be much, much lower. (In this example, it would be around 10.8%).

  • Your EMI (for 3 years): ₹3,265

  • Total Interest Paid: ₹17,540

Look at the difference:

  • Old NBFC Loan: You paid ₹30,140 in interest.

  • New Co-Lending Loan: You paid only ₹17,540 in interest.

You saved ₹12,600 just because of co-lending!

So, YES, your personal loan will be cheaper. You are getting the benefit of the bank’s cheap money.

Part 4: The Other Big Question: Will My Loan Be FASTER?

 

Yes. This is the second-biggest benefit.

The reason co-lending exists is to combine the Bank’s Money with the NBFC’s Speed.

  • NBFCs are “Fintech” companies. “Fintech” means “Financial Technology.”

  • Their entire business is built on a fast, smooth, digital experience.

  • They have world-class apps.

  • They use e-KYC (Aadhaar and PAN verification in 10 seconds).

  • They use Video KYC (a 2-minute video call to verify you).

  • They use Digital Bank Statement Analysis (their computer reads your bank statement in 30 seconds to see your salary).

  • They use AI and machine learning to approve your loan.

Banks are very slow. They still use old systems. A loan application at a bank can take 2 to 7 days.

In a co-lending model, the NBFC handles the full application process. You use the NBFC’s fast app. You get the 5-minute approval.

The bank has already made an agreement with the NBFC. The bank trusts the NBFC’s technology. So, the bank’s money flows to you instantly through the NBFC’s app.

You get the best of both:

  • Speed & Approval: From the NBFC.

  • Money & Low Interest: From the Bank.

So, YES, your loan approval will be much faster than at a bank.

Part 5: Are There Other Benefits for Me? (The “Pros”)

 

Yes, “cheaper” and “faster” are the main benefits, but there are three other big advantages for you.

Benefit 1: Higher Approval Rate (Better Access to Loans)

 

This is a very big benefit, especially if your CIBIL score is not “perfect.”

  • Bank Only (Old Way): You apply to a bank with a CIBIL score of 720. The bank’s strict rule says “Only 750+.” The computer says “REJECTED.”

  • Co-Lending (New Way): You apply to the NBFC app with the same 720 score.

    • The NBFC is more flexible. Their system says, “This person’s CIBIL is ‘average,’ but their salary is stable. It’s a bit risky, but okay.”

    • Because the loan is a “team-up,” the risk is shared.

    • The bank takes the “safer” 80% part of the loan, and the NBFC takes the “riskier” 20% part.

    • Together, they can approve you. Your loan is “APPROVED.”

This model allows banks and NBFCs to give loans to people who were “stuck in the middle”—like “new-to-credit” (no CIBIL score yet) or “average” CIBIL score borrowers.

Benefit 2: More Choices for Everyone

 

This “team-up” creates more competition. And more competition is always good for the customer (you).

  • Old Way: Your only choice for a cheap loan was to go to a big bank, stand in line, and hope.

  • New Way: Now, 20 different FinTech apps and NBFCs can “team up” with banks. Suddenly, all of them can offer you a cheap loan.

  • You can sit at home on your phone and compare 5 different “co-lending” offers and pick the one with the lowest EMI.

  • This forces all lenders to be better, faster, and cheaper to win your business.

Benefit 3: Reaching Small Towns (Financial Inclusion)

 

This is a big benefit for India.

  • Big banks do not have branches in every small town or village. It’s too expensive.

  • But small NBFCs and Micro-Finance Institutions (MFIs) are everywhere. They have local agents who know the people in that village.

  • The Problem: The local NBFC has good customers but not enough money. The big Bank has lots of money but no way to reach the village.

  • The Solution: Co-Lending. The big Bank in Mumbai “teams up” with the small NBFC in a village in Bihar.

  • This allows the bank’s cheap money to flow to a small farmer or a shop owner who needs it, all through the local NBFC.

  • This helps more people join the official, safe banking system and avoid dangerous, high-cost local moneylenders.

While big banks already have special products for some prime customers (like the excellent https://fiknow.com/loan-for-defence-personnel/), co-lending helps bring that “special” low pricing to many more new-to-bank customers across the country.

Part 6: What Are the Risks or “Cons”? (The Honest Part)

 

This model is new, and it is not perfect. As your financial friend, we must tell you about the risks, too.

Risk 1: Customer Service Confusion

 

The RBI made a rule for a “single point of contact.” But what if the company does not follow it well?

  • The Problem: You have a problem with your EMI. You call the NBFC’s call center. The agent is new and doesn’t understand co-lending. They put you on hold for 20 minutes and then say, “Sir, your loan is with X Bank, please call them.”

  • You then call the Bank. The bank’s agent says, “Sir, your loan is from Y NBFC, please call them.”

  • This can be very, very frustrating.

Risk 2: Complex Agreements (The “Fine Print”)

 

Your loan agreement will be a “tri-partite” agreement.

  • Tri-partite = Three parties.

  • Party 1: You (the Borrower)

  • Party 2: The Bank (Lender 1)

  • Party 3: The NBFC (Lender 2)

  • This agreement can be 20-30 pages long. It can be very confusing. It might be hard to understand who is responsible for what.

Risk 3: Data Privacy Concerns

 

This is a modern-day risk.

  • Old Way: You give your data (PAN, Aadhaar, Bank Statement) to one company (the bank).

  • New Way: You give your data to the NBFC app. The NBFC then shares this data with its partner Bank.

  • Now, two companies have your private financial information.

  • This doubles the risk. What if one of them has a data leak? This is a valid concern. You must trust both the NBFC and the Bank to keep your data safe.

Risk 4: Who Is Responsible for Mistakes?

 

What if the EMI is ₹5,000, but the NBFC’s app by mistake cuts ₹5,500 from your account?

  • Who do you blame?

  • The NBFC will blame the Bank’s system.

  • The Bank will blame the NBFC’s app.

  • Getting your ₹500 back might become a big headache.

As the system gets older, these problems will get fixed. But in the beginning, there can be confusion.

Part 7: How to Spot a Co-Lending Loan (And What to Do)

 

This is the most important, “actionable” part of the guide. How do you, as a smart borrower, handle this?

You don’t need to be afraid of co-lending. You just need to be aware.

How to Spot if Your Loan is a “Co-Lending” Loan

 

  1. Read the Key Fact Statement (KFS):

    • This is the RBI’s new, compulsory rule.

    • Before you sign any loan, the lender must give you a 1-page summary called the KFS.

    • A co-lending KFS will clearly state:

      • “This loan is being provided by [ABC Bank] and [XYZ NBFC] under a co-lending arrangement.”

    • If you see two company names, it is a co-lending loan.

  2. Read the Loan Agreement:

    • Look at the very first page. It will say, “This loan agreement is between:” and it will list all three parties (you, the bank, the NBFC).

  3. Just Ask!

    • Ask the loan agent or the app’s chat support a simple, direct question:

    • “Is this a co-lending loan? Who is your partner bank for this loan?”

    • They are required to tell you.

Your 3-Point Checklist Before You Sign

 

If you find out it is a co-lending loan, just ask these 3 smart questions. This will protect you.

  1. “Who is my ‘Grievance Redressal Officer’?”

    • This is the “Complaint” department. Ask for the name, email, and phone number of the person responsible for handling problems. By law, they must give you this. Save this information.

  2. “What is the final, blended APR?”

    • Don’t just ask for the “interest rate.” Ask for the APR (Annual Percentage Rate).

    • The APR includes the interest plus all processing fees. It is the real cost of the loan.

  3. “Will I get one EMI statement or two?”

    • The correct answer is “One.” You should have one single EMI, one single statement, and one single repayment plan. If they say, “You have to pay two EMIs,” that is a big red flag.

Conclusion: Is Co-Lending Good for You?

 

So, let’s answer the title: Will your personal loan get cheaper and faster?

YES. Absolutely.

Co-lending is good news for you, the borrower.

  • It is Cheaper because you get the benefit of a big bank’s low interest rate.

  • It is Faster because you get the benefit of a modern NBFC’s app and technology.

  • It is Easier because you might get “Approved” even if a bank alone would have “Rejected” you.

The new RBI rules are like a “referee” in this “team-up.” They are there to make sure the Bank and the NBFC play fair and, most importantly, to protect you.

You don’t need to be an expert. You just need to be a smart, aware borrower. Always remember:

  1. Read the KFS (Key Fact Statement) first.

  2. See if it lists one lender or two.

  3. Ask for the final APR.

This new “team-up” is the future of lending in India. And now, you are 100% ready for it.

Frequently Asked Questions (FAQ) Section

 

Q1: What is co-lending in very simple words? A: It’s a “team-up.” A big, slow bank (with cheap money) joins hands with a fast, modern NBFC app (with good technology). Together, they give you one loan that is both fast and cheap.

Q2: Is co-lending good or bad for me? A: It is very good for you. It means you can get a loan as fast as a FinTech app, but at an interest rate that is almost as low as a big bank’s. You get the best of both.

Q3: How do I know if my loan is a co-lending loan? A: The lender must tell you. Look at the KFS (Key Fact Statement). This is a 1-page summary you get before you sign. It will clearly list the names of both lenders (e.g., “ABC Bank and XYZ NBFC”).

Q4: Who do I call if I have a problem with a co-lending loan? A: The new RBI rules state that the lender who you “signed up” with (usually the NBFC app) must be your single point of contact for all customer service. You should call them, and they must solve your problem.

Q5: Does this mean I can get a loan with a very bad CIBIL score? A: No, not really. Co-lending makes it easier for people with “average” (650-720) or “new-to-credit” (no score) to get a loan. But if you have a very bad CIBIL score (below 600), you will still likely be rejected. The lenders are sharing the risk, not ignoring it.

Q6: Does co-lending lower my CIBIL score? A: No. A co-lending loan is just like any other loan. It will appear on your CIBIL report as one loan. If you pay your EMI on time, it will increase your CIBIL score. If you pay late, it will decrease your score. The “co-lending” part makes no difference to your score.

External Links (For Your Own Research)

 

We want you to be 100% informed. Please check these official websites for more information.

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