Abstract
Based on input from concerned stakeholders and aiming to maximize the strengths of both banks and NBFCs, the Reserve Bank of India (RBI) introduced a model to facilitate better credit flow to underserved sectors of the economy. This model, known as the ‘Co-lending model’, aims to make funds more readily available to the end recipient at a lower cost by combining the resources of banks and NBFCs. This partnership provides a commendable solution for mid-sized and smaller NBFCs that are often in need of funds. Co-lending has become a popular choice for banks and borrowers due to cost advantages, improved clientele quality, transparency, seamless digital/cashless processes, and diversification. This article provides an overview of various aspects of the model, from its origin to future prospects, including its advantages, disadvantages, market size over the past 5 years, and the role of third parties in ensuring a smooth onboarding process. Despite initial challenges, the model has been well-received by stakeholders and promises a bright future.