Central Bank of India Partners with IIFL Finance for Co-Lending: What It Means for Borrowers

Written by Sagar Raina | Published: March 12, 2026 | 8 min read

Central Bank of India has partnered with IIFL Finance under the co-lending model, as reported by The Financial Express. The arrangement brings together a public sector bank and a non-banking financial company (NBFC) to jointly extend loans, aiming to widen credit reach while sharing risk. Such partnerships are becoming more common in India’s lending landscape as banks and NBFCs look to combine strengths.

Overview of the Co-Lending Partnership

The partnership between Central Bank of India and IIFL Finance is structured under the Reserve Bank of India’s co-lending framework. Under this model, banks and NBFCs jointly originate loans and share exposure according to agreed terms.

While detailed product-level information has not been fully disclosed publicly, the collaboration is expected to focus on retail and priority-aligned segments where NBFCs typically have stronger sourcing and customer reach.

  • Involves joint loan origination by a PSU bank and an NBFC
  • Operates within RBI’s co-lending guidelines

Why Banks Are Partnering with NBFCs

Public sector banks often have access to low-cost funds and strong balance sheets, while NBFCs like IIFL Finance are known for faster turnaround times and niche customer acquisition. Co-lending allows both entities to leverage these complementary strengths.

For banks, such tie-ups can help expand lending without building new distribution channels. For NBFCs, partnerships can reduce funding costs and balance sheet pressure.

  • Banks gain wider reach without high acquisition costs
  • NBFCs benefit from lower cost of funds

Potential Impact on Borrowers

For borrowers, co-lending arrangements can improve access to formal credit, especially in segments that may be underserved by traditional bank branches. Loan processing may be faster when NBFCs handle sourcing and initial assessment.

However, borrowers should clearly understand which entity is responsible for servicing, grievance redressal, and key loan terms, as both the bank and NBFC are involved.

  • Possibility of faster loan processing
  • Need for clarity on servicing and customer support

Regulatory and Risk Considerations

The RBI’s co-lending framework outlines roles, risk-sharing, and compliance responsibilities for participating institutions. Both partners are required to maintain transparency and adhere to regulatory standards.

From a risk perspective, asset quality and underwriting discipline remain critical. Any weaknesses at the origination stage could affect both entities, given the shared exposure.

  • Governed by RBI’s co-lending guidelines
  • Shared credit risk between partners

How This Fits into Central Bank of India’s Strategy

For Central Bank of India, co-lending partnerships can support growth in retail and priority segments without significant increases in operational overheads. Such collaborations may also help diversify the loan portfolio.

At the same time, execution quality and partner alignment will be important to ensure that growth does not come at the cost of higher credit risk.

  • Supports portfolio expansion through partnerships
  • Requires strong monitoring and controls

Outlook for Co-Lending in India

Co-lending between banks and NBFCs has gained traction as credit demand evolves and digital origination becomes more common. Similar partnerships across the sector suggest this model is likely to continue.

The long-term success of such arrangements will depend on borrower experience, asset performance, and regulatory oversight, rather than headline growth alone.

  • Model is gaining wider adoption in India
  • Sustainability depends on asset quality and compliance

Frequently Asked Questions

What is co-lending in banking?

Co-lending is a model where a bank and an NBFC jointly provide a loan, sharing both funding and credit risk under RBI guidelines.

Who will handle loan servicing in this partnership?

Typically, the NBFC manages customer interface and servicing, but exact responsibilities depend on the agreement and should be clarified in loan documents.

Does this partnership affect existing customers?

The tie-up mainly applies to new loans originated under the co-lending model and may not directly impact existing borrowers.

Is co-lending riskier for borrowers?

Co-lending itself does not make loans riskier for borrowers, but customers should review terms carefully to understand obligations and grievance mechanisms.

Sources

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