Piramal Finance CEO: Co-lending Norms to Shift Monetisation Models
A shift in regulatory expectations is prompting Indian NBFCs to move from immediate gain-on-sale accounting to sustained yield-sharing in co-lending partnerships.
- Upfront monetisation models for co-lending and direct assignment face potential disruption under revised norms.
- Pure origination arrangements are expected to remain stable, but capital-light distribution strategies require recalibration.
- Lenders must prepare for a shift from immediate P&L recognition to long-term interest income structures.
- Strategic focus is moving toward AI-led lending and managing funding costs amidst regulatory changes.
The Shift in Co-Lending Monetisation
The landscape for co-lending in India is undergoing a structural transition. Recent observations from Piramal Finance indicate that while the core mechanism of originating loans remains intact, the financial treatment of these assets is under pressure. Specifically, the model of originating loans to monetise them upfront through direct assignment or co-lending to investors is unlikely to survive in its current form.
This change suggests a move away from 'gain-on-sale' accounting, where NBFCs could book immediate profits upon transferring a loan. Instead, the industry is being steered toward models where income is realised over the life of the loan, aligning the interests of the originator and the investor more closely over the long term.
Impact on NBFC Growth and Book Size
For large NBFCs, co-lending has become a critical engine for growth, allowing for a capital-light approach to expanding the balance sheet. The transition away from upfront monetisation does not necessarily signal a slowdown in volume, but it does change the velocity of capital recycling.
Lenders who have relied on immediate P&L recognition to fuel further lending cycles will now need to adjust their liquidity management. The focus is shifting toward the quality of the underlying assets and the sustainability of the interest-sharing ratio between the NBFC and the banking partner.
Rs 5,000 crore
Current co-lending book size for Piramal Finance
20–25 per cent
Annualised growth rate of the co-lending book
Accounting Implications for BFSI Leaders
The primary challenge for CFOs and Heads of Partnerships lies in the valuation of co-lending books. Under the previous models, the ability to monetise assets upfront provided a significant boost to quarterly earnings. The revised framework implies that these gains will now be spread across the tenure of the loan.
This shift necessitates a recalibration of internal rate of return (IRR) calculations and a revision of partnership agreements. Lenders must ensure that their cost of funds and operational expenses are sustainable without the immediate cushion provided by upfront assignment premiums.
The transition from upfront gains to long-term yield sharing will fundamentally redefine how NBFCs value their partnership ecosystems.
Toolyt Pulse analysis
The Role of AI and Technology in Lending
As the financial structures of co-lending evolve, the operational efficiency of the lending process becomes a key differentiator. Lenders are increasingly looking toward AI-led lending to maintain margins in an environment of rising funding costs and regulatory scrutiny.
AI integration helps in better risk assessment and automated decision-making, which is essential when the profit is realised over time rather than at the point of sale. Efficient origination and high-quality underwriting are no longer just about volume; they are about ensuring the long-term health of the interest-bearing book.
What this means for execution
For execution teams, the move away from upfront monetisation requires a tighter integration between the field force and the back-end risk engines. Since the NBFC will hold a stake in the loan's performance over a longer duration, the quality of data captured at the point of origination is paramount. Sales teams must be incentivised not just for lead volume, but for the long-term viability of the borrower.
Toolyt helps field teams in the BFSI sector manage these complex co-lending workflows by providing a mobile-first platform that ensures compliance-ready data capture and real-time visibility into the loan origination journey. As the industry moves toward a yield-sharing model, maintaining high productivity and low operational leakage through platforms like Toolyt will be essential for protecting margins.
Frequently asked questions
Will pure origination models be affected by the new norms?
According to the analysis of recent statements, pure origination arrangements are expected to continue working as they currently do. The primary impact is targeted at models designed for upfront monetisation through direct assignment.
How does this change affect NBFC profitability?
It shifts the timing of profit recognition. Instead of booking a 'gain-on-sale' at the start, NBFCs will recognize income as interest is paid over the loan's life, which may impact short-term P&L statements but potentially creates more stable long-term revenue.
What should partnership heads focus on now?
Partnership heads should focus on structuring agreements that emphasize long-term yield sharing and robust credit quality, rather than immediate capital recycling through asset sales.
This briefing is written by the Toolyt Pulse desk with AI assistance, based on publicly reported Indian BFSI news. Facts and figures are limited to what the cited source reports; everything else is clearly framed as analysis. We do not publish unverified numbers, forecasts presented as fact, or quotes that were not reported. Primary source: ETBFSI. Spotted something inaccurate? Write to hello@toolyt.com.