Now Reading: Small finance banks seek RBI approval for co-lending
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Small finance banks seek RBI approval for co-lending
Small finance banks have approached the Reserve Bank of India since October 2025 seeking permission to join co-lending arrangements, ETBFSI reports. The industry made two formal representations and held a meeting with…
The Story in Brief
Small finance banks have approached the Reserve Bank of India since October 2025 seeking permission to join co-lending arrangements, ETBFSI reports. The industry made two formal representations and held a meeting with the regulator in recent weeks. RBI’s co-lending framework, effective from January 1, 2026, permits eligible commercial banks, NBFCs and All-India Financial Institutions to jointly lend, but excludes small finance banks, regional rural banks and local area banks.
RBI’s concern is that outsourcing loan origination could weaken small finance banks’ financial inclusion mandate. The lenders are seeking limited partnerships in specialised segments where they lack infrastructure, such as gold loans. They have proposed safeguards, including caps on participation and prescribed fee structures, rather than unrestricted access.
The Indian Opinion
The easy narrative is that small finance banks simply want fee income, while the opposite claim is that any partnership automatically serves financial inclusion. Both are too broad. A specialist partner could fill genuine gaps, but excessive dependence could dilute the banks’ own lending role. RBI’s decision should turn on clear limits, accountability and evidence that customers benefit. The key test is how much lending SFBs originate and retain under any approved arrangement.
Source: bfsi.economictimes.indiatimes.com
This story was synthesised by AI from the source linked above.
