1. Introduction

Vide Circular FIDD.CO.Plan.BC.08/04.09.01/2018-19 dated September 21, 2018, the Reserve Bank of India (RBI) issued guidelines on the co-origination of loans by banks and NBFCs for priority sector lending. Subsequently, to better leverage the comparative advantages of banks and NBFCs through a collaborative approach, RBI issued revised guidelines vide Circular RBI/2020-21/63 FIDD.CO.Plan.BC.No.8/04.09.01/2020-21 dated November 5, 2020, introducing the Co-Lending Model (CLM). The revised framework replaced the earlier co-origination scheme with the CLM to improve the flow of credit to the unserved and underserved sectors of the economy. By combining the lower cost of funds available to banks with the wider outreach and customer access of NBFCs, the CLM aims to make credit more accessible and affordable for the ultimate beneficiaries while strengthening priority sector lending.

As per the Guidelines, all banks and NBFCs are required to formulate Board-approved policies for entering into the Co-Lending Model (CLM) and publish these approved policies on their respective websites. In compliance with this requirement, Home Plus Finance Limited (HPFL) has formulated this Policy on Co-Lending with Banks (“Policy”), which establishes the framework and guiding principles for undertaking co-lending arrangements in accordance with the Reserve Bank of India (RBI) guidelines.

2. Policy Terms

Board/BOD	shall mean Board of Directors of the Company;
Borrower	shall mean a person who is engaged in a financial transaction or activity with the Company and Co-lender, under a Co-lending Arrangement; and includes a person on whose behalf the person engaged in the transaction or activity is acting;
Co-Lender(s)/Co-lending Bank/NBFC	shall refer to bank(s)/NBFCs with whom the Company has or intends to enter into Co-lending Arrangement;
Co-lending Arrangement	shall mean an arrangement entailing joint contribution of credit at the facility level by both the lenders as also sharing of risks and rewards;
Master Agreement/ Agreement	shall mean the business partnership agreement entered between Company and Co-lender for undertaking Co-lending Arrangement in accordance with the provisions of this Policy;

b) Applicability.
The Policy is applicable to following segments –

• Co-origination of loan with scheduled commercial banks only, excluding SFBs, RRBs, UCBs and LABs and foreign banks (including WOS) with less than 20 branches.
• Lending to be made for retail mortgage assets.
• Lending made to priority sector and non-priority sector as defined by RBI.
• Bank to not belong to the same promoter group.

Under the Co-Lending Model (CLM), Co-Lender(s) may enter into co-lending arrangements with Home Plus Finance Private Limited (HPFL) through a duly executed Master Agreement or any other mutually agreed arrangement. In accordance with the terms of the Co-Lending Arrangement, the Co-Lender(s) shall assume their agreed share of each individual loan on a back-to-back basis, while HPFL shall retain the remaining agreed share on its books. The respective loan shares shall be maintained in compliance with the applicable regulatory guidelines issued by the Reserve Bank of India (RBI), as amended from time to time.

Home Plus Finance would follow the same provisions for co-lending with NBFCs (including HFCs).

c. Execution of Master Agreement

Based on this Policy, a Master Agreement shall be executed between Home Plus Finance Private Limited (HPFL) and the Co-Lender(s), setting out the terms and conditions governing the co-lending arrangement. The Master Agreement shall, inter alia, specify the criteria for selecting partner institutions, the eligible product lines, and the areas of operation. It shall also clearly define the roles and responsibilities of each party, including provisions relating to customer interface, Know Your Customer (KYC) compliance, and customer protection, in accordance with the applicable guidelines issued by the Reserve Bank of India (RBI).

The Master Agreement may provide that the Co-Lender(s) shall either mandatorily acquire their agreed share of the individual loans originated by Home Plus Finance Private Limited (HPFL) in accordance with the terms of the agreement or retain the discretion to reject specific loans after conducting the necessary due diligence before taking such loans onto their books.

The Master Agreement will provide representations and warranties which HPFL shall be liable in respect of the share of the loans taken into the books by the Co-Lender(s).

The Master Agreement shall be executed in compliance with the applicable Co-Lending Guidelines issued by the Reserve Bank of India (RBI). It shall incorporate the commercial terms and conditions governing the co-lending arrangement, including the criteria for selecting partner institutions, eligible product lines, and areas of operation. The Agreement shall also clearly define the segregation of roles and responsibilities between the parties, customer interface and protection mechanisms, applicable interest rates, sharing of sourcing and processing fees, cross-selling rights, revenue-sharing arrangements, post-disbursement servicing responsibilities, and the fees applicable to such servicing, along with any other mutually agreed commercial terms.

d. Know Your Customer (KYC) compliance

The Company and the Co-Lender(s) shall comply with the Master Direction – Know Your Customer (KYC) Direction, 2016 issued by the Reserve Bank of India (RBI) vide Circular RBI/DBR/2015-16/18 Master Direction DBR.AML.BC.No.81/14.01.001/2015-16 dated February 25, 2016, as amended from time to time. In accordance with these directions, regulated entities may, at their discretion and subject to the prescribed conditions, rely on the customer due diligence (CDD) carried out by a third party for the purpose of complying with KYC requirements.

e. Co-Lender(s) mandatorily taking their share of the individual loans as originated by HPFL

Where the Master Agreement provides for a prior and irrevocable commitment by the Co-Lender(s) to acquire their agreed share of individual loans originated by Home Plus Finance Private Limited (HPFL), the co-lending arrangement shall comply with the applicable Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks issued by the Reserve Bank of India (RBI) vide Circular RBI/2014-15/497/DBR.No.BP.BC.76/21.04.158/2014-15 dated March 11, 2015, as amended from time to time. Accordingly, HPFL and the Co-Lender(s) shall establish appropriate ex-ante due diligence mechanisms to ensure that the credit appraisal and sanction process remains under the control of the respective lending institutions, as the outsourcing of credit sanction functions is not permitted under the applicable RBI guidelines.

f. Co-Lender(s) retaining the discretion to certain loans subject to its due diligence

Where the Master Agreement permits the Co-Lender(s) to exercise discretion in deciding whether to acquire their share of loans originated by Home Plus Finance Private Limited (HPFL), the co-lending arrangement shall be treated as a direct assignment transaction. In such cases, the Co-Lender(s) shall ensure compliance with the applicable Guidelines on Transactions Involving Transfer of Assets through Direct Assignment of Cash Flows and the Underlying Securities issued by the Reserve Bank of India (RBI), as amended from time to time. This includes adherence to all regulatory requirements governing direct assignment transactions, except for the Minimum Holding Period (MHP), which shall not apply to transactions undertaken under the Co-Lending Model (CLM).

The exemption from Minimum Holding Period (MHP) shall be available only in cases where the prior agreement between the Co-Lender(s) and Home Plus Finance Private Limited (HPFL) includes a back-to-back basis clause and complies with all other conditions prescribed under the applicable guidelines for direct assignment issued by the Reserve Bank of India (RBI).

g. Interest Rate

The ultimate Borrower may be charged an all-inclusive interest rate as may be agreed upon by both the lenders conforming to the extant guidelines applicable to both.

Upon repayment, the interest shall be shared between HPFL and the Co-Lender(s) in proportion to their share of credit and interest.

h. Customer servicing and related issues

HPFL shall be the single point of interface for the customers. Suitable consent in this regard must be taken from customers. In case of Co-Lending Arrangement with NBFCs, the agreement may provide for the Point of Interface.

The extant guidelines relating to the customer service and fair practices code and the obligations enjoined upon the Co-Lender(s) and HPFL therein shall be applicable mutatis mutandis in respect of loans given under the Co-lending Arrangement.

HPFL should be able to generate a single unified statement of the customer, through appropriate information-sharing arrangements with the Co-Lender(s).

i. Grievance Redressal

With regard to grievance redressal, the Co-Lender(s) and Home Plus Finance Private Limited (HPFL) shall establish appropriate mechanisms to ensure that any complaint registered by a borrower with HPFL is resolved within 30 days. In the event that the complaint is not resolved within the stipulated period, the borrower shall have the right to escalate the matter to the concerned Banking Ombudsman/Ombudsman for NBFCs or to the Customer Education and Protection Cell (CEPC) of the Reserve Bank of India (RBI).

j. Escrow Account

The Co-Lender(s) and HPFL shall each maintain individual Borrower’s account for their respective exposures.

However, wherever applicable, transactions relating to disbursements and repayments between the Co-Lender(s) and Home Plus Finance Private Limited (HPFL) under the Co-Lending Model (CLM) may be routed through an escrow account maintained with banks, so as to avoid any intermingling of funds. In such cases, the Master Agreement shall clearly define the manner of appropriation and settlement between the co-lenders, in accordance with the applicable guidelines issued by the Reserve Bank of India (RBI).

k. Monitoring & Recovery

The Co-lenders shall establish a framework for monitoring and recovery of the loan, as mutually agreed upon in the Master Agreement.

The loans under the CLM shall be included in the scope of internal/ statutory audit within the Co-Lender(s) and HPFL to ensure adherence to their respective internal guidelines, terms of the agreement and extant regulatory requirements.

l. Security & Charge creation

The Company and Co-Lender(s) shall arrange for creation of security and charge as per mutually agreeable terms.

m. Provisioning & Reporting requirement

HPFL shall adhere to the asset classification and provisioning requirement, as per the regulatory guidelines applicable including reporting to Credit Information Companies (CICs), under the applicable regulations for its share of the loan account.

n. Assignment

Any assignment of a loan by Co-lender or HPFL to a third party can be done only with the consent of the other lender.

o. Business Continuity Plan

Co-Lender(s) and HPFL shall implement a business continuity plan to ensure uninterrupted service to their Borrowers till repayment of the loans under the Co Lending agreement, in the event of termination of Co-lending Arrangement between the co- lenders.

p.  Approving Authority for Co-lending Arrangement

The Co-Lending Arrangement between the Company and the Co-Lender(s) shall be approved
by Board of Directors.

Deviation from the Policy

The Policy shall be always complied with by the Company. Any deviation from the Policy shall be only after due approval of Board of Directors.

q. Policy implementation

HPFL shall place the Board approved policies for entering the CLM on its website.

The Director is authorized to take appropriate decisions and actions in the effective implementation of the Policy.

r. Review and Amendments

The Board reserves the power to review and amend this Policy from time to time. All provisions of this Policy would be subject to revision or amendment in accordance with the applicable law as may be issued by relevant statutory, governmental, or regulatory authorities, from time to time.