JSA
This edition of the JSA Brief showcases JSA authored articles, updates & newsletters and achievements such as deals and events in all practice area over the preceding month (July 2025).
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JSA is advising JM Financial Limited, HSBC Securities and Capital Markets (India) Private Limited, Nuvama Wealth Management Limited, SBI Capital Markets Limited and Centrum Capital Limited in relation to the proposed initial public offering of equity shares (“IPO”) of OnEMI Technology Solutions Limited. The IPO consists of a fresh issue aggregating up to ₹10,000 million and an offer for sale of up to 8,879,575 equity shares from the Investor Selling Shareholders.
OnEMI Technology Solutions Limited filed the draft red herring prospectus dated August 18, 2025, with the Securities and Exchange Board of India (SEBI) on August 19, 2025.
The JSA team advising on this transaction was led by Arka Mookerjee (Lead Partner) and included members of the Equity Capital Markets team: Siddhartha Desai (Partner), Govind Roy (Senior Associate), Prateek Khandelwal (Associate), Aditya Shendye (Associate), Anvita Sinha (Associate), Aditi Khandal (Associate), Sourav Jena (Associate) and Johann Duckworth, (Junior Associate).
Please click here to download the Newsletter as PDF.
The Securities and Exchange Board of India (“SEBI”), the Reserve Bank of India (“RBI”) and the Insolvency and Bankruptcy Board of India (“IBBI”) have introduced significant regulatory updates in the banking and finance and insolvency space in July 2025.
RBI issued the RBI (Pre-payment Charges on Loans) Directions, 2025 (“Pre-payment Directions”) to govern floating rate loans to micro and small enterprises. It has also issued the regulatory guidelines to govern investments by Regulated Entities (“REs”) in Alternative Investment Funds (“AIF”). IBBI amended the corporate insolvency resolution process regulations to strengthen disclosure requirements and limit the assignment of certain avoidance transactions. SEBI has mandated accessibility compliance for all digital platforms of REs under the Rights of Persons with Disabilities Act, 2016 (“RPwD Act”).
SEBI issued a circular on July 31, 2025, mandating all REs to ensure digital accessibility for persons with disabilities in accordance with the RPwD Act and the Rights of Persons with Disabilities Rules, 2017 (“RPwD Rules”). These entities are required to make their digital platforms accessible to persons with disabilities by adhering specifically to certain sections of the RPwD Act such as: (a) Section 40 (Accessibility) which mandates accessibility across public infrastructure, including digital platforms, which SEBI extends to securities market interfaces; (b) Section 42 which requires Information and Communication Technology (“ICT”) services such as websites and apps to be accessible; and (c) Section 46 which sets a statutory timeline for implementing accessibility. Further, Rule 15(1)(c) of the RPwD Rules prescribes the standards issued by Bureau of Indian Standards (IS 17802) for ICT accessibility.
REs must provide updates on the status of implementation of accessibility provisions on all digital platforms, specifically in accordance to the prescribed milestones. Further, the compliance reporting for this circular must be done on annual basis within 30 (thirty) days from the end of each financial year in the prescribed manner.
IBBI, vide notification dated July 4, 2025, has notified the IBBI (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025, The amendment focus on enhanced disclosure and transparency in resolution processes.
Some of the key provisions are as follows:
RBI, vide notification dated July 29, 2025, has passed the AIF Directions. Regulated entities such as commercial banks (including small finance banks, local area banks and regional rural banks), primary (urban) co-operative banks/state co-operative banks/ central co-operative banks all-India financial institutions; and non-banking financial companies (including housing finance companies) will be required to comply with the AIF Directions.
The AIF Directions prescribe the regulatory guidelines governing investments by the aforesaid regulated entities in AIFs and provide for limits on investment in such AIFs and relevant provisioning requirements to be complied by the regulated entities. The AIF Directions come into force from January 1, 2026, or at an earlier date decided by the respective regulated entities pursuant to its internal policies.
For a detailed analysis, please refer to the JSA Prism of August 12, 2025.
In an important decision on the interplay between the Insolvency and Bankruptcy Code, 2016 (“IBC”) and the Prevention of Money Laundering Act, 2002 (“PMLA”), the National Company Law Appellate Tribunal, Principal Bench, New Delhi, in Mr. Anil Kohli, Resolution Professional for Dunar Foods Limited vs. Directorate of Enforcement and Anr.[1], has held that the assets attached by the Enforcement Directorate which are ‘proceeds of crime’ cannot be claimed as part of the resolution estate under the IBC. Further, it was clarified that the overriding effect of Section 238[2] of the IBC does not extend to negate valid actions taken under the PMLA, which operates in a distinct legislative domain.
For a detailed analysis, please refer to the JSA Prism of July 22, 2025.
SEBI, in its board meeting held on June 18, 2025, has approved the introduction of a new co-investment framework under the SEBI (AIF) Regulations, 2012. This permits Category I and Category II AIFs to offer co-investment opportunities through a Co-Investment Scheme, in addition to the existing Portfolio Management Services route. The amendment is aimed at streamlining the co-investment process, easing regulatory burdens, and enhancing operational efficiency.
For a detailed analysis, please refer to the JSA Prism of July 18, 2025.
On July 2, 2025, RBI has notified the Directions for prohibiting prepayment penalties on floating rate loans availed by individuals for non-business purposes. It also extends relief to micro and small enterprises and individuals borrowing for business needs under certain conditions. The Directions will be applicable to loans sanctioned or renewed on or after January 1, 2026.
RBI also mandates clear disclosure of prepayment charges in loan agreements and key fact statement. This move aims to improve transparency, encourage borrower mobility , and prevent unfair lending practices.
For a detailed analysis, please refer to the JSA Prism of July 3, 2025.
This Newsletter has been prepared by:
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Anish Mashruwala |
Karan Mitroo |
Purvi Dabbiru |
Harsh Dugar |
Riddhi Sri |
For more details, please contact [email protected]
[1] Company Appeal (AT) (Ins.) No. 389 of 2018 (decided on July 3, 2025)
[2] The overriding provision under the IBC: “The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
Please click here to download the document as PDF.
SEBI, vide circular dated July 2, 2025, has decided to alleviate the issue faced by investors, Registrar & Share Transfer Agents (“RTAs”), and listed companies that some of the investors had missed the March 31, 2021, deadline for re-lodging their documents for transfer of securities, by opening a special window only for re-lodgement of transfer deeds. It is applicable to the deeds that were lodged prior to the deadline of April 1, 2019, and rejected/returned/not attended to due to deficiency in the documents/process/or otherwise, for a period of 6 (six) months from July 7, 2025, till January 6, 2026. During this period, the securities that are re-lodged for transfer (including those requests that are pending with the listed company/RTAs, as on date) must be issued only in demat mode.
To promote ease of doing investment and convenience to Non-Resident Indians (“NRIs”) for trading in exchange traded derivatives contracts, and to bring in operational efficiency, SEBI, vide circular dated July 29, 2025, has decided to do away with the mandatory requirement of NRIs having to notify the names of clearing member/s and subsequent assignment of a unique Custodial Participant (“CP”) Code to the NRIs by the exchange. Accordingly, for NRIs trading in exchange traded derivative contracts without CP code, the exchange/clearing corporation must monitor the NRI position limits in the same manner as client level position limits are monitored by them. Therefore, the stock exchanges/clearing corporations are directed to:
RBI vide notification dated July 29, 2025, has passed the ‘RBI (Investment in Alternative Investment Funds) Directions, 2025’ (“AIF Directions”). Regulated entities such as commercial banks (including small finance banks, local area banks and regional rural banks), primary (urban) co-operative banks/ state co-operative banks/ central co-operative banks all-India financial institutions; and non-banking financial companies (including housing finance companies) will be required to comply with the AIF Directions.
The AIF Directions prescribe the regulatory guidelines governing investments by the aforesaid regulated entities in Alternative Investment Funds (“AIFs”) and provide for limits on investment in such AIFs and relevant provisioning requirements to be complied by the regulated entities. The AIF Directions come into force from January 1, 2026, or at an earlier date decided by the respective regulated entities pursuant to its internal policies.
For a detailed analysis, please refer to the JSA Prism of August 13, 2025.
On July 2, 2025, RBI has notified the RBI (Pre-payment Charges on Loans) Directions, 2025 (“Directions”) for prohibiting prepayment penalties on floating rate loans availed by individuals for non-business purposes. It also extends relief to micro and small enterprises and individuals borrowing for business needs under certain conditions. The Directions will be applicable to loans sanctioned or renewed on or after January 1, 2026.
The RBI also mandates clear disclosure of prepayment charges in loan agreements and key fact statement. This move aims to improve transparency, encourage borrower mobility, and prevent unfair lending practices.
For a detailed analysis, please refer to the JSA Prism of July 3, 2025.
India’s defence manufacturing sector is witnessing rapid growth, driven by record-high exports, strategic policy reforms and the push for self-reliance under the Atmanirbhar Bharat initiative. With major investments, industrial corridors and increased private sector participation, India is steadily positioning itself as a global hub for defence production and innovation.
With the objective to strengthen security guidelines for defence company, the Department for Promotion of Industry and Internal Trade has released the press note 3 of 2025 apprising that the Department of Defence Production (“DDP”), Ministry of Defence, has issued a revised Security Manual for Licensed Defence Industries (“Manual”). This revision is aimed to address the rapidly evolving security and technology landscape especially the recent surge in sophisticated cyberattacks targeting Indian defence establishments.
This marks the first significant update since the 2014 Manual, which required substantial overhaul to keep pace with contemporary security and operational demands. The updated Manual places greater emphasis on cyber and physical security, risk based categorisation of industries and mandates compliance for all companies holding industrial licences issued by the DDP. It aims to safeguard classified information, materials and infrastructure across licensed defence production sites.
For a detailed analysis, please refer to the JSA Prism of July 29, 2025.
Against the backdrop of Directorate of Enforcement issuing summons to 2 (two) senior advocates, the Supreme Court of India (“Supreme Court”), on June 25, 2025, took notice of the recent trend of investigating agencies summoning lawyers in respect of legal advice rendered by them while discharging their professional duties.
While granting relief to a Gujarat-based attorney, the Supreme Court acknowledged the gravity of the concerning trend and stayed the operation of a notice issued under section 179 of the Bharatiya Nagarik Suraksha Sanhita. Pertinently, the Supreme Court framed broader issues and placed them before the Chief Justice of India for appropriate directions. By seeking assistance of relevant stakeholders, such as bar associations and the Solicitor General, the Supreme Court aspires to comprehensively address the issue and find a balanced solution. Although the issue requires further consideration, this order is a step in the right direction as lawyers across the nation breathe a sigh of relief.
For a detailed analysis, please refer to the JSA Prism of July 1, 2025.
The Delhi High Court in a recent judgment has held that the jurisdiction of an arbitral tribunal is not ousted simply because some part of the subject matter of arbitration proceedings is being investigated in parallel for fraud by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002 (“PMLA”). This finding is based on settled law that allegations of fraud simpliciter do not make a dispute non-arbitrable. This judgement further clarifies that in case of an overlap between the findings of an arbitral tribunal and proceedings under the PMLA, the proceedings under the PMLA will take precedence.
For a detailed analysis, please refer to the JSA Prism of July 15, 2025.
The Bombay High Court has examined the interplay between Section 7 and Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSME Act”), to provide clear guidance on the procedural framework to be followed when the Micro Small Enterprises Facilitation Council under the MSME Act fails to discharge its statutory obligations, – namely, initiating conciliation and taking steps for appointment of the arbitrator. The High Court has expressly clarified that such failure empowers a party to invoke the jurisdiction of a court under Section 11 of the Arbitration Act for appointment of an arbitrator.
This judgment is a welcome development for Micro, Small and Medium Enterprises (“MSMEs”). It reinforces the principle that statutory dispute resolution mechanisms must function with efficacy and accountability, ensuring MSMEs are not left without recourse due to procedural defaults if any, by statutory authorities.
For a detailed analysis, please refer to the JSA Prism of July 15, 2025.
The Calcutta High Court has reinforced contractual clarity in commercial transactions by stating that arbitration clauses in purchase orders constitute binding agreements, even when later tax invoices contain inconsistent jurisdiction clauses. The court’s ruling underscores that performance and correspondence reflecting consensus will uphold, signalling that unilaterally issued post-contract documents cannot override agreed dispute resolution mechanisms.
For a detailed analysis, please refer to the JSA Prism of July 21, 2025.
This Newsletter has been prepared by:
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Varun Sriram |
Sarvesh Saluja |
Nandini Menon |
Neeral Jain |
Aadhitya Logeshen |
For more details, please contact [email protected]
JSA advised Syrma SGS Technology Limited (the “Issuer”) on its qualified institutions placement (“QIP”) of 14,306,151 equity shares with a face value of INR 10 each, aggregating to approximately INR 10,000 million.
JM Financial Limited and DAM Capital Advisors Limited acted as the Book Running Lead Managers to the issue.
Syrma SGS Technology Limited is one of India’s leading Electronic System Design and Manufacturing (ESDM) companies in the non-consumer segment, and specializes in precision manufacturing for diverse end-use industries, including industrials, automotive and electric mobility, consumer, healthcare and medical devices, railways and information technology..
The JSA team was led by partner Madhurima Mukherjee Saha, with support from the Capital Markets team comprising of Partner, Shivali Singh; Senior Associate, Bhavini Mohan; Associates, Rachit Munjal, Anshuman Singh, Devyani Mishra and Adnan Danish.
JSA Advocates & Solicitors (JSA), advised Intensive Fiscal Services Private Limited and DAM Capital Advisors Limited, the Book Running Lead Managers, in relation to the initial public offering of equity shares of All Time Plastics Limited (“IPO”) comprising a fresh issue and an offer for sale by the Promoter Selling Shareholders. The total IPO size, including a pre-IPO placement, aggregated to ₹4,706.03 million.
All Time Plastics Limited is a manufacturing company with more than 14 years of experience in producing plastic consumerware products for everyday household needs, and its equity shares were listed on the Stock Exchanges on August 14, 2025.
The JSA team was led by partner Madhurima Mukherjee Saha, with support from the Capital Markets team comprising of Partner, Shivali Singh; Senior Associate, Ambuj Gupta; Associates, Priyanshi Bajaj, Tamanna Kapoor, Adnan Danish, Badal Singh, Shirish Sachdeva and Zaier Ahmad.
Please click here to download the Prism as PDF.
With a view to harmonise and consolidate the regulatory framework for extending Non-Fund Based (“NFB”) facilities (particularly guarantees and co-acceptances), the Reserve Bank of India (“RBI”), on August 6, 2025, has issued the Non-Fund Based Credit Facilities Directions, 2025 (“NFB Directions”). The NFB Directions also include specific guidelines for Partial Credit Enhancement (“PCE”) facility, which aim to strengthen the bond market, for, inter alia, bonds issued by corporates to fund projects. The NFB Directions will be applicable from April 1, 2026, or at an earlier date as adopted by a regulated entity in accordance with its internal policy.
The NFB Directions are applicable to the following entities (referred to as Regulated Entities “REs” under the NFB Directions):
Further, the NFB Directions are not applicable to derivative exposure of REs, however REs are still required to adhere to the general conditions laid down in Chapter II of the NFB Directions (as also synopsised below) in respect of their derivative exposures.
The NFB Directions stipulate certain general conditions required to be complied by REs for issuance of an NFB facility (including derivative exposures), which inter alia require REs to establish an internal credit policy for issuance of NFB facilities, covering aspects such as limits, credit appraisal, security requirement, fraud prevention, and monitoring.
Further, the NFB Directions have simplified regulations relating to the issuance of NFB facilities by REs for those customers who have not availed a fund-based credit facility from such RE. Generally, issuance of an NFB facility to such customers is prohibited, however, the restriction is not applicable for the following:
Additionally, the NFB Directions restrict REs from issuing NFB facility for assuring redemption/repayment of funds raised by an entity, unless such NFB facility has been specifically permitted by the RBI.
The details of NFB credit facilities extended by REs must be disclosed in the format provided in the NFB Directions.
The NFB Directions require REs to issue irrevocable[2], unconditional[3], incontrovertible guarantees, containing mechanism for honor upon invocation (unless there is a court order restraining such honor), without any demur. Further, REs are required to have an internal policy for issuance of such guarantees, which policy is required to address, inter alia, ceilings for issuances generally and for unsecured guarantees, invocation, settlement, claim period, etc.
Electronic guarantees
The NFB Direction recognises issuance of electronic guarantee by REs, for which, REs are required to frame Standard Operating Procedure (“SOP”). The broad guidelines for framing such SOPs have been elucidated in Annex 1 of the Directions.
Guarantee favouring another RE
The NFB Directions have prohibited REs from issuing guarantee in favour of another RE as security in relation to a fund-based credit facility (other than in respect of trade related transactions) being extended by such other RE. However, this restriction is not applicable where such other RE is extending an NFB facility.
Guarantees involving overseas transactions
The NFB Directions continue to permit authorised dealer banks to:
Guarantees on behalf of stock/commodity brokers
The NFB Directions restrict all REs other than Scheduled Commercial Banks (“SCBs”) to issue guarantees on behalf of stock/commodity brokers in favour of stock/commodity exchanges, in lieu of the security deposit/margin requirements stipulated by the exchange.
REs are required to co-accept only genuine trade bills and ensure that the subjected goods are received in the stock account of the borrower. Further, REs are not permitted to co-accept bills which are either drawn by another RE or where the underlying transaction has already been financed by another RE.
In addition to SCBs (excluding RRBs), the Directions also permit AIFIs and NBFCs in middle layer (including HFCs) and above (collectively the “PCE Permitted REs”) to issue a PCE facility in relation to bonds issued by: (a) corporates/ special purpose vehicles for funding projects; (b) non-deposit taking NBFCs (registered with the RBI including HFCs) having an asset size of INR 1,000 crore (Indian Rupees one thousand crore) or more for the purpose of refinancing the existing debt of such NBFCs/ HFCs; and (c) municipal corporations subject to paragraph 2.3.7.3(iii) of the Master Circular – Loans and Advances – Statutory and Other Restrictions dated July 1, 2015. The RBI envisages that the PCE facility may assist in enhancing the credit rating of aforementioned bonds, thus enabling access to funds on better terms.
The primary guidelines in relation to a PCE facility are as follows:
The NFB Directions also provide that refinancing of project loans by way of a PCE facility backed bonds issuance will not amount to restructuring under the Prudential Framework for Resolution of Stressed Assets.
Guidelines for balance sheet treatment, capital requirements, exposure limits, and asset classification norms related to PCE facilities have also been stipulated in the NFB Directions.
The key changes introduced by the NFB Directions include the following:
The NFB Directions lay down a harmonious and clear path for issuance of NFB facilities by REs, including co-operative banks and AIFIs. The REs will benefit from the lucid and concise instructions contained in the directions for determining the permissibility of transactions. Further, the NFB Directions will also empower the board of REs to stipulate suitable internal policies for the purpose of extending NFB facilities, within the contours of the broad guidelines suggested by the RBI. By categorically restricting certain transactions, the NFB Directions will result in a decrease in the overall risk exposure of REs, while increasing their accountability and monitoring requirements, for extending an NFB facility.
The RBI has consistently focused on developing the bond market in India by issuing various circulars incentivising and safeguarding the bond market participant. The introduction of a consolidated and comprehensive PCE framework, allowing participation by AIFIs, NBFCs and certain HFCs, will also assist in the growth by providing a reliable fallback mechanism for the investors and paving the way for participation by NBFCs which are expanding at an exponential rate.
This Prism has been prepared by:
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Nand Gopal Anand |
Harshit Dusad |
Vrindesh Patel |
For more details, please contact [email protected]
[1] Specified in paragraph 7.3.5 of Master Circular – Basel III Capital Regulations dated April 1, 2025, as amended from time to time.
[2] Implying that there will be no clause in the contract that would allow the guarantor to unilaterally cancel the same.
[3] Implying that there will be no clause in the contract that could prevent the RE from being obliged to pay out in a timely manner in the event that the original counterparty fails to meet its obligation.
[4] Refer the Foreign Exchange Management (Overseas Investment) Directions, 2022 for detailed instructions on issuance of guarantee specified hereunder.
Please click here to download the Prism as PDF.
The Reserve Bank of India (“RBI”) on July 29, 2025, has issued the Reserve Bank of India (Investment in AIF) Directions, 2025 (“AIF Directions”) which prescribe regulatory guidelines to govern investments by Regulated Entities (“REs”) in Alternative Investment Funds (“AIF”). The AIF Directions come into force from January 1, 2026 (“Effective Date”), or at an earlier date decided by the respective REs pursuant to its internal policies.
With a view to address concerns relating to ‘evergreening’, a practice where REs conceal non-performing loans by pumping fresh funds to an existing borrower through investment in AIFs, the RBI had earlier issued the following circulars dated December 19, 2023, and March 27, 2024 (“Existing Circulars”) covering the below key provisions:
After taking into account the industry feedback, as well as the regulations issued by the Securities Exchange Board of India, RBI conducted a thorough review of its Existing Circulars and has issued the AIF Directions which will repeal the Existing Circulars with effect from the Effective Date.
The AIF Directions will be applicable to investments by the following REs in the units of AIF schemes:
The following 2 (two) definitions as provided in the AIF Directions determine the application of the provisioning requirements:
The AIF Directions by the RBI marks a significant shift from the earlier blanket restrictions and provides a consolidated framework governing the investments made by REs in AIF. The specified limits on investment and provisioning requirements provide a structured approach to managing risks associated with AIF exposures, particularly in relation to debtor companies. Through the introduction of these AIF Directions, the RBI seeks to mitigate systemic risks, particularly those arising from indirect exposures to debtor companies, while allowing REs to participate in the AIF ecosystem within a regulated boundary. As the AIF Directions come into effect from the Effective Date, REs will need to proactively align their investment policies and risk management frameworks to ensure full compliance and operational readiness under the revised regime.
This Prism has been prepared by:
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Varun Sriram |
Nandini Menon V |
Nithyashree Venkatesh |
For more details, please contact [email protected]
Please click here to download the Newsletter as PDF.
The Reserve Bank of India (“RBI”) has released the long-awaited RBI (Co-Lending Arrangements) Directions, 2025 (“Co-lending Directions, 2025”) on August 6, 2025. The Co-lending Directions will come into force on January 1, 2026, with an option for an earlier adoption by a regulated entity (“RE”) as per its internal policy.
The Co-lending Directions, 2025 are an attempt to regulate and streamline the extant Co-lending Arrangements (“CLAs”) being undertaken by banks and Non-Banking Financial Companies (“NBFCs”) in terms of the erstwhile circular on Co-Lending by Banks and NBFCs to Priority Sector (“Co-lending Circular, 2020”) which has now been repealed. The REs are not allowed to enter into any kind of co-lending arrangement other than as per Co-lending Directions, 2025.
For ease of reference, we have set out the key distinctions between the Co-lending Directions, 2025 and the Co-lending Circular, 2020 in a tabular format hereinbelow:
| Co-lending Circular, 2020 | Co-lending Directions, 2025 | Points to note |
| 1. Applicability | ||
| “All Scheduled Commercial Banks (Excluding SFBs, RRBs, UCBs and LABs), All Registered Non-Banking Financial Companies (including Housing Finance Companies).” | “These Directions shall be applicable to CLAs entered into by the following REs:
a) Commercial Banks (excluding Small Finance Banks, Local Area Banks and Regional Rural Banks); b) All-India Financial Institutions; and c) Non-Banking Financial Companies (including Housing Finance Companies).” |
All India Financial Institutions have been included as an RE.
Under the erstwhile model, the same was restricted only to banks and NBFCs. |
| 2. Scope of CLA | ||
| “Banks are permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement. The co-lending banks will take their share of the individual loans on a back-to-back basis in their books. […]”
“The banks can claim priority sector status in respect of their share of credit while engaging in the CLM (co lending model) adhering to the specified conditions.” |
“CLA refers to an arrangement, formalised through an ex-ante agreement, between a RE which is originating the loans (‘originating RE’) and another RE which is co-lending (‘partner RE’), to jointly fund a portfolio of loans, comprising of either secured or unsecured loans, in a pre-agreed proportion, involving revenue and risk sharing.”
“The credit policy of a RE shall suitably incorporate provisions relating to CLAs, including the internal limit for the proportion of their lending portfolio under CLAs; target borrower segments; due diligence of the partner entities; customer service and grievance redressal mechanism.” “REs engaging in the CLA for loans eligible to be classified under priority sector lending in terms of Master Directions – Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025 (as amended from time to time), can claim priority sector status in respect of their share of credit under CLA.” |
The purpose of CLA is no longer restricted or linked only to priority sector lending targets and such arrangements can be pursued in accordance with the credit policy of the RE.
Further, under the Co-lending Directions, 2025, a bank-to-bank or an NBFC-to-NBFC CLA is clearly specified. RE’s engaging in CLAs for loans eligible for priority lending status can claim priority sector status with respect to their share in the loan. |
| 3. Minimum share | ||
| “The co-lending banks will take their share of the individual loans on a back-to-back basis in their books. However, NBFCs shall be required to retain a minimum of 20 per cent share of the individual loans on their books.” | “Each RE under a CLA shall be required to retain a minimum 10 per cent share of the individual loans in its books.” | The minimum share of a participating RE has been reduced from 20 % to 10 %. |
| 4. Loan agreement requirements | ||
| “The NBFC shall be the single point of interface for the customers and shall enter into a loan agreement with the borrower, which shall clearly contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.” | “The loan agreement signed with the borrower shall make an upfront disclosure regarding the segregation of the roles and responsibilities (such as sourcing, and servicing) of concerned REs, including clear identification of the entity being the single point of interface with the customer. Any subsequent change in customer interface shall only be done after prior intimation to the borrower. The loan-agreement shall also appropriately disclose suitable provisions related to customer protection, and grievance redressal mechanism.” | The loan agreements must contain disclosures regarding the roles and responsibilities of each of the RE. The loan agreements are also required to appropriately disclose suitable provisions related to customer protection, and grievance redressal mechanism.
This is a notable change in position. The REs may have to reconsider the template of the loan agreements which are used for CLAs and incorporate requisite additions in line with this requirement. |
| 5. Key Fact Statement requirements | ||
| – | “All required details of CLA shall be disclosed appropriately to the concerned borrower as laid down under RBI Circular on ‘Key Facts Statement (KFS) for Loans & Advances’ dated April 15, 2024, as amended from time to time.” | The Key Facts Statement (“KFS”) for Loans and Advances was passed subsequent to the Co-lending Circular, 2020. Therefore, there was no explicit reference to KFS in the Co-lending Circular, 2020.
This has now been added to the Co-lending Directions, 2025 as a requisite update and the KFS will be provided to the borrower. |
| 6. 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.” | “The interest rate and any other fees / charges on the underlying loans charged to the borrower shall be based on the contractual agreement, subject to the regulatory norms applicable to the REs. Specifically, the final interest rate charged to the borrower shall be the blended interest rate which is calculated as an average rate of interest derived from the interest rates charged by respective REs, as per their internal lending policies and risk profile of the same or similar borrower, weighted by the proportionate funding share of concerned REs under CLA.”
“Any fees / charges payable by the borrower in addition to the blended interest rate shall be incorporated in computation of annual percentage rate (APR) and disclosed appropriately in the KFS as prescribed in the paragraph 14 of these Directions.” |
The interest rate to be charged under the Co-lending Directions, 2025 is required to be in the form of a blended interest rate derived from the interest rate of the REs participating in the CLA. This is further required to be disclosed in the KFS.
Additionally, any fees or charges payable by the borrower in relation to the loan will also be required to be disclosed in the KFS. |
| 7. Process of accounting by the REs and transfer of loan exposures | ||
| “If the bank can exercise its discretion regarding taking into its books the loans originated by NBFC as per the Agreement, the arrangement will be akin to a direct assignment transaction. Accordingly, the taking over bank shall ensure compliance with all the requirements in terms of Guidelines on Transactions Involving Transfer of Assets through Direct Assignment of Cash Flows and the Underlying Securities issued vide RBI/2011-12/540 DBOD.No.BP.BC-103/21.04.177/2011-12 dated May 07, 2012 and RBI//2012-13/170 DNBS. PD. No. 301/3.10.01/2012-13 August 21, 2012 respectively, as updated from time to time, with the exception of Minimum Holding Period (MHP) which shall not be applicable in such transactions undertaken in terms of this CLM.” | “The CLA shall ensure that the respective shares of the REs are reflected in the books of both REs without delay after disbursement by the originating RE to the borrower, in any case not later than 15 calendar days from the date of disbursement.”
“If the originating RE is unable to transfer the share of the exposure to the partner RE under CLA within 15 calendar days for any reason, then the loan/s shall remain on the books of the originating RE and can be transferred to other eligible lenders only under the provisions of Master Directions – Transfer of Loan Exposure, 2021 (MD-TLE).” “Any subsequent transfer of loan exposures originated under CLA to third parties, or any inter-se transfer of such loan exposures between REs, shall be strictly in compliance with the provisions of MD-TLE. Such transfers to a third party, however, can be done only with the mutual consent of both the originating and partner REs.” |
The timeline for exposures to be reflected in the books of the respective REs has been crystallised. There was no similar timeline under the Co-lending Circular, 2020.
In the event the originating RE is unable to ensure the above, then any subsequent transfer of the loan will be required to be done under the Master Directions – Transfer of Loan Exposure, 2021 (“MD-TLE”), and accordingly a minimum holding period as per the said directions will be required to be complied with by the originating RE. Separately, it may be noted that while the loans disbursed under the priority sector must comply with applicable guidelines (with the exception of the minimum holding period), there was an ambiguity in the Co-lending Circular, 2020 regarding assignment of the loans under the CLA (other than priority sector lending), as to whether the same should be carried out in compliance with the MD-TLE. Now, the Co-lending Directions, 2025, state that the MD-TLE would not be applicable at the time of disbursement for the loans disbursed under CLA. Having said that, subsequent assignment by a participating RE of its share of the loan will have to comply with MD-TLE. |
| 8. Digital lending | ||
| – | “Digital lending arrangements shall continue to be governed by the Reserve Bank of India (Digital Lending) Directions, 2025 (“MD-DLD”) as amended from time to time.
Any digital lending arrangement involving co-lending by the REs shall, without derogation to the MD-DLD, be guided by the provisions of these Directions” |
In the event that a CLA covers a digital lending transaction, then the Co-lending Directions, 2025 will apply to the extent applicable but without derogation to the RBI (Digital Lending) Directions, 2025. |
| 9. Default loss guarantee | ||
| – | “Originating RE may provide default loss guarantee up to five per cent of loans outstanding in respect of loans under CLA. Provision of such default loss guarantee shall be governed mutatis mutandis in terms of the MD-DLD as amended from time to time.” | There was no such provision under the Co-lending Circular, 2020. The inclusion of this provision affirms the view that partner RE may require the originating RE to provide a default loss guarantee to the partner RE to ensure that the originating RE continues to house the risk in relation to the loans originated by them (over and above 10 %). |
| 10. ‘Know Your Customer’ requirements | ||
| “The bank shall also be required to comply with the Master Directions – Know Your Customer (KYC) Direction, 2016, issued vide RBI/DBR/2015-16/18 Master Direction DBR.AML.BC.No.81/14.01.001/2015-16 dated February 25, 2016 and updated from time to time, which already permit regulated entities, at their option, to rely on customer due diligence done by a third party, subject to specified conditions.” | “RE involved under CLA shall comply with the prescribed norms under the Master Direction – Know Your Customer (KYC) Direction, 2016 as amended from time to time. Partner RE may rely upon the originating RE for “Customer Identification Process” as per the provisions of the said Master Directions on KYC.” | The Co-lending Directions, 2025 have removed the ambiguity in relation to ‘know you customer’ requirements for CLAs under the Co-lending Circular, 2020 wherein it had created a system of ‘double KYC’, with the responsibility falling on both the bank and the NBFC. |
This Prism has been prepared by:
|
Anish Mashruwala |
Pratish Kumar |
Srinjoy Bhattacherjee |
Madhur Bhatt |
For more details, please contact [email protected]
JSA advised Intellihealth Solutions Private Limited (d/b/a Truemeds) and its Founders on its Series C fundraises. The round’s first close was led by Accel, followed by a second close led by Peak XV Partners, with significant participation from existing investors WestBridge and InfoEdge Ventures.
Truemeds is a leading telehealth platform which includes providing generic and substitute medicines,and is focused on enabling greater affordability in healthcare access.
The JSA transaction team was Rishabh Gupta (Partner), Akshath Mithal (Principal Associate), Tanmayee Shriprasad Apte (Associate), and Saurabh Chatterji (Associate).
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