In order to improve the flow of credit to the unserved and underserved sector of the economy, the Reserve Bank of India (RBI) has come out with a Co-Lending Model (CLM) scheme under which banks can provide loans along with NBFCs to priority sector borrowers based on a prior agreement.
The CLM, which is an improvement over the co-origination of loan scheme announced by the RBI in September 2018, seeks to provide greater flexibility to the lending institutions. As per a notification by RBI, NBFCs will be the single point of interface for the customers and shall enter into a loan agreement with the borrowers. The agreement should clearly contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.
The RBI also said that all transactions (disbursements/ repayments) between the banks and NBFCs relating to CLM have to be routed through an escrow account maintained with the banks, in order to avoid inter-mingling of funds.