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 have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

Under a co-lending arrangement between a bank and an NBFC, who is responsible for loan recovery? is governed in India primarily by RBI Co-Lending Model Guidelines 2020, Indian Contract Act 1872, Section 43 and RBI Master Direction on Outsourcing of Financial Services. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

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 to do next: 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.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under RBI Co-Lending Model Guidelines 2020 carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. 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 this practice area.