Your bank receives a high-value MSME loan application that fits your risk criteria, but due to funding limitations, you must stall the approval. Meanwhile, you find ideal co-lending partners who are ready to share the funding and loan management. However, your current system cannot manage multi-partner workflows, automated settlements, or track compliance for each participant. As a result, you are forced to reject the loan.
Situations like these are becoming common in India, despite the co-lending market steadily growing, with public sector banks disbursements totalled over ₹11,497 crores in FY 2024. This is because most financial institutions use traditional LMS, which are designed to handle single-partner transactions only.
Multi-partner lending requires intelligent coordination between institutions that follow different processes and operate under different regulatory requirements. To capture opportunities, you need a loan management system that is developed solely for co-lending and multi-partnership operations.
Let us understand first why conventional LMS systems struggle with these complex requirements.
Why Traditional LMS Systems Fail in Co-Lending Operations
Legacy platforms fall short where collaboration and transparency matter the most in co-lending. Traditional LMS are primarily designed to process single-partner financing, which makes them inefficient to fit the shared responsibilities inherent in multi-partner loan management. Such systems lack partner onboarding roadmaps, shared dashboards, and features that help allocate risks accurately. They also fail to provide real-time visibility of fund flows, interest calculations, or repayment distributions across multiple co-lenders.
Because of this gap, lenders often face increased processing time, misallocations, and potential compliance violations. The good news is that specialised co-lending platforms address these bottlenecks through their purpose-built features.
Essential Features of Co-Lending-Ready LMS
If you move to a co-lending compatible loan management system, you can address the technical and operational challenges that come with multi-partner lending through purpose-built features and modern lending architecture.
1. Multi-Partner Dashboards for Transparent Process
Multi-partner dashboards in co-lending LMS provide each partner with customised views of portfolio performance, risk metrics, origination status, settlements, defaults, and repayment progress, all in real-time.
These dashboards eliminate information silos and ensure all parties work from the same, accurate data.
2. Automated Fund Transfer for Settlement Accuracy
Co-lending-native LMS systems have intuitive automated fund transfer capabilities built into the system, which streamline the settlement process that otherwise require manual reconciliation.
The system automatically calculates each partner’s share based on predefined ratios, executes transfers according to scheduled timelines, and maintains detailed audit trails for regulatory compliance.
In some instances, banks and NBFCs end up having different costs of funds despite lending at an agreed ratio. LMS platforms can eliminate such inefficiencies by handling processing fees, delayed interest, and penal interest between banks and NBFCs before EMIs start coming in.
3. Better Market Penetration and Reach
Many borrowers in rural regions may have good creditworthiness but lack the means to reach you. For instance, you may focus more on unsecured lending while there might be borrowers with high-value assets ready to be used for secured lending.
With a co-lending-ready LMS, you can reach customers you might not serve on your own. By pooling resources and networks with partners, you can enter new geographies, cater to different borrower segments, and tap into markets with high demand for credit.
4. Integration with Partner Systems
Modern co-lending LMS connect easily with partner systems and regulatory databases. This integration ecosystem enables real-time data sharing and standardised communication protocols. Partners can work together without changing their existing systems.
The integration also connects with third-party service providers like credit bureau reports, bank statement analysers, accounting and CRM software, and payment gateways, creating a complete ecosystem where information flows automatically between all parties involved in the lending process.
5. Automated Key Facts Statement for Loans
RBI’s guidelines state that the lender should share a Key Facts Statement (KFS) with the borrower. Multi-party loan management platforms automatically generate the mandatory Key Facts Statement (KFS). The KFS contains information, such as the terms, conditions, and participants of the loan, that the lenders must share with the borrower.
6. Measurable Operational Benefits
Faster loan processing happens when partners work in parallel rather than in sequence. Banks can use fintech digital onboarding while NBFCs contribute risk models. This teamwork cuts approval times from weeks to days.
Shared risk management becomes more effective with real-time monitoring. The loan management system combines risk data from multiple portfolios and identifies problems early. It sends alerts when risk levels cross safe limits, protecting all partners.
Market reach grows naturally when the loan management system makes partnerships easy to manage. Banks access new customer channels while NBFCs get better funding rates. The technology removes barriers that previously made partnerships difficult.
7. Customer-Centric Experience
When it comes to customer interaction, the borrower only interacts with the lead lender. The co-lending LMS keeps all the backend processes, challenges, and data hidden, so that customers see only a single-loan experience, improving their confidence and loan journey.
8. Automated Bookkeeping
The LMS can handle bookkeeping automatically by generating ledgers and trial balances based on each partner’s share in the loan. The NBFC will know exactly how much to remit to the bank, and the bank will know the amount receivable from the NBFC.
9. Success Metric Tracking
One of the most interesting features of the co-lending LMS is that it allows lending partners to measure success easily using built-in analytics. NBFCs and banks can get actionable insights like approval rates, processing times, and portfolio diversification.
According to Crisil Ratings, co-lending AUM (asset under management) is nearing INR 1 lakh crore, with 30 to 40% annual growth projections for NBFCs. A reliable LMS will help you capitalise on this trend.
Key Takeaway
Co-lending is an excellent option for Indian NBFCs and banks to diversify their loan portfolio, as it allows lenders to share risk, take on larger and complex loan applications, and reach more borrowers, especially funding underserved customers. For applicants, it makes access to formal credit at competitive interest rates much easier.
However, your success completely depends on the type of loan management system you use. You should prioritise a solution that can handle partner coordination, settlements, compliance, and reporting in real-time.
Finezza’s web-based co-lending-ready LMS removes common operational bottlenecks in co-lending and helps you and your partners scale faster. With unique solutions like bank statement analysis, loan origination systems, collection and delinquency management, credit bureau data analysis, and AA integration, Finezza improves loan processing, makes sure you get the right settlement, and keeps customers coming in.
To know how Finezza’s loan management system can fit into or refine your co-lending practices and scope, book a demo.
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