News | Canara Bank Halts Unsecured Co-Lending Amid Concerns Over NBFC Underwriting Standards

Canara Bank Halts Unsecured Co-Lending Amid Concerns Over NBFC Underwriting Standards

News

19 May 2025

2 min read

UBS Forums

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In a move underscoring growing scrutiny around lending practices, Canara Bank has announced a halt to its unsecured loan disbursements under co-lending arrangements. The decision stems from concerns regarding the underwriting rigor exercised by its NBFC partners.

While the bank’s current co-lending book remains modest—estimated at around ₹1,200–1,300 crore and concentrated largely in priority sector lending—it has opted to tighten controls rather than expand into more volatile lending segments. The core issue? A misalignment in risk assessment standards between the bank and some of its NBFC collaborators.

According to internal commentary, several NBFC partners displayed underwriting practices that didn’t meet the bank’s threshold for credit quality. As a result, Canara Bank has drawn a firm line: unless partners match the bank’s own credit standards, there will be no expansion in unsecured co-lending activity.

This decision comes even as regulatory bodies look to broaden the co-lending framework to include non-priority sectors. However, Canara Bank is choosing a conservative stance, prioritizing credit discipline over growth in riskier segments.

Beyond lending policy, the bank remains focused on organic expansion. It has committed to opening 250 new branches this fiscal year, with licenses for 110 already secured. Additionally, it plans to invest ₹800 crore in enhancing its technology infrastructure—specifically targeting analytics capabilities to support smarter branch placement and improved customer targeting.

Canara Bank’s decision sends a clear message: in an evolving financial landscape, lending partnerships must be rooted in shared standards, especially when the stakes involve unsecured credit.

Reference : ET BFSI