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Co-lent loans under the RBI Co-Lending Model carry an 80:20 economic share between a bank and an NBFC. Every collection must split correctly between the partners by category — principal, interest, penal interest, bounce charge, GST on penal interest — and the resulting DPD bucket must flow through to both books on the same day to keep NPA classification synchronised.
Tag each collection event by loan account, instalment, and category. Compute the 80:20 split on principal and interest, the 100:0 split on penal interest where servicing income is retained by the NBFC, and the agreed share on bounce charges plus GST. Sweep the bank's share to its nostro within the master-agreement cut-off. Transmit DPD bucket movements to the bank in the daily partner file so asset classification is synchronised.
Co-lending master agreement parameter set — share percentages by category, escrow cut-off windows, servicing fee formula. Loan-account-level DPD register feeding both NBFC and partner-bank classification engines. Partner-bank acknowledgement file format for settlement-day reconciliation.
Daily 80:20 settlement file accepted by the partner bank, synchronised NPA classification on the same DPD trigger, audit-ready category-wise split log, and clean quarter-end portfolio reconciliation against the bank's ledger.
The RBI Co-Lending Model (CLM), introduced in November 2020 and refined through subsequent clarifications, has moved from pilot to mainstream. A material share of the Indian NBFC book — particularly in MSME, affordable housing, and rural credit — is now originated under co-lending arrangements with scheduled commercial banks. The operating mechanics look simple on paper: bank takes 80%, NBFC takes 20%, NBFC services the loan. In execution, every day-end produces a settlement file whose accuracy determines whether the partnership continues to function.
Quick reference: co-lending economics
| Parameter | Bank share | NBFC share | Notes |
|---|---|---|---|
| Minimum loan share | 80% | 20% | Per the November 2020 CLM master direction |
| Pricing | Bank’s own MCLR/EBLR | Blended yield | NBFC may charge over its cost of funds within the master cap |
| Borrower interface | Indirect | Servicer of record | NBFC handles collections, restructuring requests, and grievances |
| NPA classification trigger | 90 DPD | 90 DPD | Synchronised — based on the underlying account |
| Settlement frequency | Daily T or T+1 | Daily T or T+1 | As agreed in the master |
What collections actually contain
A single instalment collection from a borrower is not a single number. It decomposes into:
- Principal
- Contractual interest
- Penal interest where the instalment is paid after the due date
- Bounce charge if a prior NACH presentation returned
- GST on bounce charge and on penal interest where the master agreement treats them as services
The 80:20 split is not uniform across these. Principal and contractual interest move with the economic share. Penal interest is frequently retained by the NBFC alone as servicing income — making the split 100:0. Bounce charges may be 100:0 to the NBFC, 100:0 to the bank, or a negotiated share. GST tracks the underlying service, not the principal. An engine that treats the entire collection as one number and splits 80:20 generates a wrong sweep on every instalment that contains penal interest or bounce charges.
The daily settlement cycle
A defensible co-lending operation runs a four-step day-end:
- Capture every collection event in the loan management system, tagged by loan account number, instalment number, and category — sourcing from NACH inward credit, UPI VPA inflow, RTGS/NEFT, cash receipt, or cheque clearance.
- Compute the category-wise split using the master-agreement parameter set. The split is deterministic per category — encoded in configuration, not in code.
- Sweep the bank’s share from the collection escrow to the bank’s designated nostro within the cut-off window. Most masters require T or T+1 settlement; missing the window triggers a penalty clause and ages a dispute.
- Reconcile against the bank’s acknowledgement file the next morning. Breaks are investigated within 24 hours; an aged break is a reportable event under the master.
Try this on real numbers: see how the split decomposes on a sample instalment using the three-way match exception cost calculator framework adapted to category-wise settlement.
NPA classification flow-through
Asset classification under the RBI prudential norms is account-based, not share-based. If a co-lent loan is 90 DPD on the servicer’s records, the underlying account is NPA — and both the bank’s 80% and the NBFC’s 20% turn NPA on the same day. The NBFC is the source of truth for DPD because it operates the collection system. A DPD-bucket movement reported in the daily partner file drives the bank’s classification engine the next day.
This creates a hard operational dependency. If the NBFC’s collection MIS misses a partial collection or double-counts a reversal, the DPD bucket on its records is wrong — and the bank classifies on the wrong bucket. The audit trail must show, for every loan, the closing DPD bucket on each day and the partner-file line item that carried it.
Servicing fee, escrow flow, and the GST overlay
The NBFC’s servicing fee is paid by the bank under the master agreement — typically a percentage of the bank’s collections, paid monthly against an invoice. This servicing fee is a B2B taxable service under CGST and attracts GST at 18% on the issued invoice, with TDS deducted by the bank under Section 393(1)(b) (replacing 194J) at the applicable rate. Reconciliation must tie:
- Monthly servicing fee invoice → bank’s TDS deduction in Form 26AS under the bank’s TAN
- Servicing fee GST → bank’s GSTR-2B for ITC claim on its side, NBFC’s GSTR-1 outward supply on the NBFC side
- Servicing fee sweep date → master-agreement payment terms (typically T+7 or T+15 from invoice date)
Each of these is a separate reconciliation against a different counter-party file. The settlement engine must hold a view of the partnership that links all three.
Audit evidence pack at quarter-end
A bank partner’s internal audit and statutory auditor will request, for each co-lending partnership:
- Portfolio-level reconciliation: gross collections vs 80:20 split vs actual sweeps, with variance log
- Loan-level DPD register for the quarter, with bucket movements highlighted
- NPA register tied to the bank’s NPA classification on the same accounts
- Servicing fee invoice register tied to TDS Form 26AS credits and GST returns
- Write-off and provisioning summary with the bank’s accounting policy applied
Producing this pack at quarter-end with a manual aggregation across spreadsheets is the bottleneck most NBFCs hit by their second or third co-lending partner. Each new partner adds a master agreement with its own category-wise splits, its own cut-off windows, and its own acknowledgement file format.
How TransactIG handles the partner-file surface
TransactIG configures co-lending as a multi-partner servicing model: each partner is a parameter set encoding share percentages by category, cut-off windows, sweep account, acknowledgement file format, and servicing fee formula. The engine ingests the daily collection events, computes per-loan splits by category, generates partner-specific settlement files, reconciles against acknowledgements, transmits DPD bucket movements, and produces the quarter-end audit pack from the same data lineage. No code fork per partner; new partners onboard as new configuration.