Under a co-lending arrangement between a bank and an NBFC, who is responsible for loan recovery?

Question

My loan was disbursed under a co-lending arrangement between a bank and an NBFC, and now both entities are separately contacting me for recovery. Who is actually responsible? I would like to understand which provision governs this, what it entitles me to, and how long I have before the remedy lapses. I also want to know whether I need a lawyer for this or can do it myself.

MyVakeel Legal Desk · Accepted Answer

In India, the answer to "Under a co-lending arrangement between a bank and an NBFC, who is responsible for loan recovery?" turns on RBI Co-Lending Model Guidelines 2020, Indian Contract Act 1872, Section 43 and RBI Master Direction on Outsourcing of Financial Services. The points below set out the position and then what to do about it, in the order it should be done.

Under the RBI's Co-Lending Model Guidelines 2020, a bank and an NBFC jointly originate and fund a loan in a pre-agreed proportion, typically with the NBFC holding a minimum share on its books, and both entities are contractually co-lenders to the same borrower.

The guidelines require that the borrower be given a single blended interest rate and one loan agreement or a combined disclosure, so that the borrower is not left confused about which entity to approach, and both co-lenders are jointly responsible for ensuring transparent communication.

Since both the bank and NBFC are joint creditors under the arrangement, each is entitled to recover its respective share of the debt, and under principles analogous to Section 43 of the Indian Contract Act 1872 on joint promisors, a borrower may in practice be approached by either party for the amount actually due to it.

The RBI's Master Direction on Outsourcing of Financial Services makes the regulated entity accountable for the conduct of its recovery agents even in a co-lending structure, meaning both the bank and NBFC remain responsible for ensuring fair and non-coercive recovery practices from their respective agents.

If a borrower experiences harassment, double recovery demands, or inconsistent statements of dues from the two co-lenders, this itself is a service deficiency that can be raised with both entities' grievance redressal officers and escalated to the RBI Ombudsman.

What this means for you: 1) Request a single consolidated loan statement clarifying the amount due to each co-lender; 2) Cross-check that you are not being asked to pay the same instalment twice to both entities; 3) Raise any inconsistency or harassment in writing with both the bank's and NBFC's grievance officers; 4) Escalate to the RBI Ombudsman if the co-lenders fail to resolve the confusion or recovery practices remain unfair.

Where the facts are disputed, what usually decides a co-lending model recovery matter is the paper trail — dated complaints, acknowledgments and written replies under RBI Co-Lending Model Guidelines 2020. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in banking law.