Auditing co-lending under the RBI’s 2025 Directions: a practical checklist

The short answer

To audit co-lending under the RBI’s 2025 Directions, confirm which arrangements are in scope, then test four things with system data rather than summaries: that each lender keeps at least 10% of every individual loan, that the partner books its share within 15 calendar days of disbursement, that any default loss guarantee stays within 5% of loans outstanding, and that approvals on both sides can be traced end to end.

1. Confirm the arrangement is in scope

The Reserve Bank of India (Co-Lending Arrangements) Directions, 2025 (RBI/DOR/2025-26/139, 6 August 2025) have applied since 1 January 2026, or earlier where a lender’s own policy adopted them sooner. They cover commercial banks (other than small finance banks, local area banks and regional rural banks), all-India financial institutions, and NBFCs including housing finance companies. Loans under multiple banking, consortium lending or syndication are outside them.

The bigger change is coverage: co-lending between regulated entities generally, not just priority-sector loans. So start with the full list of arrangements the entity treats as co-lending, including ones the business doesn’t think of as “PSL co-lending”, and check each one against the Directions.

2. Board policy and partner due diligence

Check that the Board-approved credit policy now covers co-lending: exposure limits, borrower segments, how partners are selected and reviewed, and how grievances are handled. Compare the approval date with the date the entity started operating under the new framework.

Then look at the partner register. For each partner, who did the due diligence, on what evidence, and when is the next review due? A partner register that lives in someone’s inbox is a finding waiting to happen.

3. The 10% retention test, loan by loan

The Directions require each regulated entity to retain a minimum 10 per cent share of the individual loans in its books. “Individual loans” matters: a portfolio average does not satisfy it.

• Recompute each lender’s share for a sample of loans from the loan system, not from a summary sheet.
• Look hardest at restructured, partly prepaid and top-up loans, where a share can drift below 10% without anyone noticing.
• Ask how a breach would be detected. If the answer is “the analyst checks the workbook”, record the dependency on one person.

4. The 15-day booking clock

The partner lender has to record its share not later than 15 calendar days from the date of disbursement. Calendar days, not working days. Test it with dates, not confirmations.

• For a sample, compare the disbursement date in the originator’s system with the booking date in the partner’s books.
• Ask for the exception report: how many loans crossed 15 days, and what happened to them.
• If there is no exception report, that is the observation. A control that cannot show its exceptions is hard to rely on.

5. Default loss guarantee against the 5% cap

Where the originating lender gives a default loss guarantee, the Directions cap it at five per cent of loans outstanding under the arrangement. Check how the outstanding base is calculated, how often the cap is monitored and who signs it off, then recompute it yourself for one period end.

6. Disclosures, rate and credit bureau reporting

Borrowers should receive clear disclosures of who does what, a single point of contact and the Key Facts Statement, and they pay a blended rate based on each lender’s rate. Check a sample of loan files for the KFS with evidence it was delivered, and recompute the blended rate for one or two loans.

Each lender reports its own share to the credit information companies. A simple reconciliation, for a sample of loans, of what each lender reported against its share in the books catches most problems.

7. The approval trail across both lenders

This is the step most often missed. A co-lent loan has approvals on both sides: the originator’s sanction, the partner’s acceptance, changes to terms, waivers and restructures. Ask to see who approved each, when, and on which version of the loan details. When approvals are split across two systems and an email thread, an entity can be compliant in substance and still unable to prove it.

A one-page audit programme

• List all co-lending arrangements and confirm scope for each.
• Review the Board-approved policy and the partner due-diligence register.
• Recompute 10% retention per loan for a sample, including restructured loans.
• Test the 15-calendar-day booking window from system dates and review the exception report.
• Recompute the default loss guarantee against the 5% cap at a period end.
• Check the KFS and disclosures on loan files, with delivery evidence.
• Reconcile credit bureau reporting with each lender’s share.
• Trace approvals for a sample of loans across both lenders, end to end.

Where it gets easier

None of this needs a new core system. Most of it is registers, timers, ratio checks and approvals with evidence. Where those run as a governed workflow, with the 15-day clock, retention and DLG checks and a full audit trail on both sides, the audit takes hours instead of weeks. On Averoic, NBFCs set this up as configured workflows alongside their existing loan and accounting systems.

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