RRBs Allowed to Join Consortium Lending with Sponsor Banks

What changed

RBI has allowed RRBs to join consortium lending arrangements with their sponsor banks, other public sector banks, and developmental financial institutions. Previously, this was not permitted. The project must be located in the RRB's operational area, and the sponsor bank must provide guidance and project appraisal.

What it means for you

This opens up new lending avenues for RRBs, enabling them to co-finance larger projects without exceeding exposure norms. Banks can now leverage sponsor bank expertise for better risk assessment. However, RRBs must ensure strict adherence to area-of-operation conditions and exposure limits.

What banks were required to do at the time

• Review and update internal policies to allow consortium lending participation with sponsor banks and other eligible institutions.
• Ensure all consortium projects are within the RRB's designated area of operation.
• Coordinate with sponsor banks to obtain project appraisal and guidance before committing funds.
• Monitor exposure limits to stay within regulatory caps while participating in consortia.

Who it affects

All Regional Rural Banks, Sponsor banks of RRBs, Public sector banks and DFIs involved in consortium lending