Co-lending lets non banking financial companies expand reach, share risk, and scale assets by partnering with banks that have deep capital and regulatory strength. Success depends on more than legal paperwork; it needs crisp governance, shared data, and disciplined execution across the life cycle. This article presents Top 10 Co-Lending Best Practices for NBFCs in a clear, practical format for credit, risk, operations, finance, and technology teams. You will find guidance on selecting partners, building robust processes, and protecting customers while safeguarding balance sheets. Use these practices to reduce leakages, speed up decisions, and build sustainable, compliant growth at scale.
#1 Select strategically aligned partners
Choose partners who share your segment focus, product constructs, ticket sizes, and risk appetite. Validate capital strength, liquidity buffers, and asset quality using audited financials and vintage curves. Check technology maturity, integration patterns, and information security certifications. Align on governance early, including decision rights, escalation paths, and clear exit clauses. Run joint stress tests for default, prepayment, and cost of funds scenarios to confirm resilience. Insist on limited pilots with gated ramp up based on predefined metrics. A careful selection process prevents strategic drift and reduces the chance of operational surprises after go live.
#2 Build a shared data backbone
Create a single source of truth for customer, application, and loan data that both parties trust. Map unique identifiers across core systems, loan management platforms, and servicing tools to prevent breaks. Use event driven integrations for key milestones such as underwriting outcomes, disbursal, repayment posting, and charge reversals. Maintain version controlled product and policy catalogs so changes are traceable. Encrypt data at rest and in transit, and mask personal information in non production environments. Define retention rules that satisfy both partners. When data flows are reliable and reconciled, disputes decline and cycle time consistently improves.
#3 Co-design the credit framework
Write a joint credit policy that covers eligibility filters, income surrogates, documentation standards, and scorecard cutoffs. Specify override authorities, required evidence, and sampling audits to prevent creep. Link pricing ladders to expected loss and cost of funds so risk based pricing remains consistent. Define early warning triggers using behaviour variables such as bounce rates, utilization, and negative media flags. Standardize treatment of edge cases so channels do not improvise. Review the framework quarterly using cohort performance, not anecdotes. Clear rules, transparent pricing, and disciplined feedback loops produce predictable portfolio outcomes across vintages.
#4 Strengthen first and second line controls
Map process risks and key controls across origination, verification, disbursal, servicing, and collections. Implement maker checker in critical steps including KYC verification, bank account validation, and refund approval. Automate sample based quality checks and publish defect dashboards visible to both partners. Define thematic reviews for channels, sourcing partners, and new products. Ensure internal audit has coordinated coverage and can access shared evidence repositories. Track corrective actions with owners and due dates until closure. A documented, tested control framework reduces operational losses, supports compliance reviews, and builds confidence to scale volumes safely.
#5 Nail funding mechanics and accounting
Decide funding splits, timing, and rebalancing rules upfront, including triggers for share changes over time. Automate disbursal files, confirmations, and payment acknowledgements with clear cutoffs. Configure sub ledgers for principal, interest, fees, taxes, charges, and provisions that roll up accurately to the general ledger. Reconcile cash, general ledger, and system balances daily with exception queues and root cause workflows. Document waterfall priorities for receipts and recoveries so disputes do not arise later. Align impairment methodologies and staging rules. Clean, timely funding and accounting reduces friction, avoids misstatements, and protects partner trust.
#6 Deliver a unified customer experience
Present a single, consistent face to the customer from marketing to closure. Use the same product names, rates, charges, and disclosures across websites, apps, and branches. Provide one helpline and a shared knowledge base so customers are never bounced between institutions. Write consent texts that clearly explain the partnership and data sharing. Offer authenticated self service for statements, repayment options, grievance submissions, and closure requests. Train frontline and vendor staff on partner processes and service level expectations. A unified experience improves satisfaction, reduces complaints, and supports stronger collections through higher customer goodwill.
#7 Define post disbursal servicing rigor
Publish a RACI that allocates responsibility for reminders, hardship support, restructuring, settlements, and foreclosure. Create standard operating procedures for refunds, disputes, chargebacks, and payment reposting. Automate dunning with contact policy caps, preferred channels, and consent capture. Synchronize payment methods and reconciliation references to prevent orphan credits. Share dispute queues, turnaround time trackers, and resolution templates to maintain consistency. Monitor vendor performance with scorecards and periodic audits. Clear servicing ownership and disciplined execution keep portfolios current, limit roll forward, and protect customer relationships through predictable, fair treatment.
#8 Stand up joint analytics and reporting
Establish a shared reporting layer that serves risk, finance, product, and operations teams. Publish daily control packs showing disbursals, approval rates, first payment defaults, bounce rates, roll rates, and collection efficiency. Build cohort analytics by vintage, channel, geography, score band, and partner share. Reconcile reported numbers to ledgers monthly and maintain a structured data dictionary. Deploy early warning models to flag at risk segments and trigger policy or line management actions. Provide self serve exploration for power users with governed access. Common metrics and transparent insights enable rapid, aligned decision making.
#9 Plan resilience and regulatory readiness
Prepare for stress events before they arrive. Maintain a regulatory response playbook with owners, document templates, and evidence repositories. Conduct periodic business continuity drills that simulate core system outages, payment network failures, and data center incidents. Define contingency disbursal and collection processes to continue operations during disruptions. Create communication protocols for partner issues, consumer alerts, and media responses. Model sharp credit deterioration and confirm capital, liquidity, and provisioning capacity. Practicing resilience reduces downtime, minimizes loss given disruption, and demonstrates strong governance when supervisors examine the program.
#10 Pre agree exit and transfer mechanics
Document exit triggers such as persistent service level breaches, risk policy violations, or strategic divergence. Specify valuation approaches, buyout options, and portfolio transfer steps, including borrower communication and consent requirements. Keep escrowed documentation current for schemas, process maps, and operating manuals to enable an orderly unwind. Design identifiers and integrations with portability in mind to avoid lock in. Run annual tabletop exercises to test readiness for full or partial exit. A fair, executable exit plan reduces uncertainty, protects customers, and preserves value for both parties under difficult circumstances.