CO LENDING MECHANISM

The Reserve Bank of has issued guidelines on co –lending of loans by Banks and NBFCs to Priority Sector. The arrangement entails joint contribution of credit at the facility level by both the lenders as also sharing of risk and rewards. The primary focus of the revised scheme, rechristened as “Co-Lending Model” (CLM) is to improve the flow of credit to the unserved sector of the economy and make available funds to the ultimate beneficiary . In this document henceforth all such partner banks/NBFCs/FIs for priority sector as well as non-priority sector will be termed as “co-lending
partners”.

Accordingly, CDL Financial Services Pvt Ltd, in compliance with this circular is adopting the following policy on Co-lending of loans.

Norms of Agreement between CDL Financial Services Pvt Ltd & Co-Lender (NBFC / HFC having valid RBI license) :

• A Master Agreement shall be entered into between CDL Financial Services Pvt Ltd and the partner institutions which shall inter-alia include, terms and conditions of the arrangement, the specific product lines and areas of operation, along with provisions related to segregation of responsibilities as well as customer interface and protection issues.

• The Master Agreement provides for the NBFC/HFCs to take their share of the individual loans, originated by CDL Financial Services Pvt Ltd, in their books as per the terms of the agreement, or to reject certain loans after their due diligence.

Loan Sharing:

• CDL Financial Services Pvt Ltd shall retain a minimum of 20 per cent share of the individual loans on its books; the percentage of retention by CDL Financial Services Pvt Ltd in all cases shall be guided by the terms of agreement between CDL Financial Services Pvt Ltd and co-lender NBFC/HFC.

Modus operandi:

Credit Norms:

In accordance with CDL credit norms, once a client has agreed to commercial terms, evaluation is done based on various parameters like

• Past history of borrowing of customer and various credit checks viz. bureau, internal dedupe, and fraud check, basic KYC documents like Aadhaar Card, PAN, Voter ID etc., as may be applicable.

• Assessment of income, business vintage, and stability, as may be applicable.

The above terms shall be defined on finer lines under the co-lending credit norms to be mutually agreed with the co-lender.

Approval norms:

CDL Financial Services Pvt Ltd shall not outsource credit decisioning process. Further, it shall ensure to seek prior approval from co-lender before conveying decision to customer on terms & conditions basis which loan has been sanctioned. CDL Financial Services Pvt Ltd shall share with co-lender various documents of customer like KYC, banking, CIBIL, technical & legal of property and revert to all queries to co-lenders satisfaction.

Interest Rate

• CDL Financial Services Pvt Ltd and the partnering NBFC/HFCs shall have the flexibility of pricing their part of exposure in accordance with their respective internal pricing strategies as may be applicable, however, the ultimate borrower shall be charged an all-inclusive interest rate.

• Upon repayment, the interest shall be shared between CDL and the co-lender in proportion to their share of credit and interest.

Fund Management

The co-lending NBFC/HFC and CDL Financial Services Pvt Ltd shall maintain each individual
borrower’s account for their respective exposures. However, all transactions
(disbursements/repayments) between CDL & co-lender relating to CLM shall be routed through an
escrow account maintained with the banks, in order to avoid inter-mingling of funds. The Master
Agreement shall clearly specify the manner of appropriation between the co- lenders.

Other Operational Aspects

• The framework for monitoring and recovery of the loan, shall be guided as per mutually agreed
terms.

• CDL Financial Services Pvt Ltd along with partnering co-lender, depending on terms of agreement,
shall arrange for creation of security and charge, as may be applicable, as per mutually agreeable
terms.

• CDL Financial Services Pvt Ltd shall adhere to the asset classification and provisioning requirement
including reporting to Credit Information Companies, for its share of the loan account.

• The loans under the CLM shall be included in the scope of internal/statutory audit to ensure
adherence to our internal guidelines, terms of the agreement and extant regulatory requirements.

• CDL Financial Services Pvt Ltd shall ensure uninterrupted service to their borrowers, on-boarded
under the current CLM, till repayment of the loans and even in the event of termination of co-
lending arrangement between the co-lenders.

Provisioning

In event of default, provisions shall be provided in books for the mentioned loan (CDL part) as per policy . Any additional provisions shall be made on case-to-case basis.

Customer related issues

• CDL Financial Services Pvt Ltd shall be the single point of interface for the customers and shall enter into a co-branded loan agreement with the borrower, which shall clearly contain the features of the arrangement and the roles and responsibilities of CDL Financial Services Pvt Ltd and co-lender.

• All the details of the arrangement shall be disclosed to the customers upfront and their explicit consent shall be taken.

• The extant guidelines relating to customer service and fair practices code and the obligations enjoined upon CDL Financial Services Pvt Ltd & co-lender therein shall be applicable mutatis mutandis in respect of loans given under the arrangement.

• CDL Financial Services Pvt Ltd should be able to generate a single unified statement of the customer, through appropriate information sharing arrangements with the co-lender.

• With regard to grievance redressal, suitable arrangement must be put in place by CDL Financial Services Pvt Ltd and the co-lenders to resolve any complaint registered by a borrower with CDL Financial Services Pvt Ltd within 30 days, failing which the borrower would have the option to escalate the same with the concerned Banking Ombudsman/Ombudsman for NBFCs or the
Customer Education and Protection Cell (CEPC) in RBI.

Any other regulatory changes with respect to co-lending mechanism will stand updated in the policy from time to time