While this toolkit focuses on compliance, building a sustainable lending business requires attention to more than just regulations. Founders must also think through broader strategic factors that shape the company’s future, such as the choice of operating model, capital strategy, technology and data infrastructure, customer trust, and partnership dynamics. This section outlines certain non-regulatory considerations that can help founders in the lending ecosystem navigate growth with resilience and foresight.

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⚠️ Disclaimer

The considerations outlined here are provided for general informational purposes only. They are not intended as legal, financial, or regulatory advice, nor should they be treated as a substitute for professional consultation. Regulatory requirements and business contexts vary, and readers are encouraged to independently verify information, seek expert guidance, and refer to official RBI circulars and other authoritative sources before making any decisions.

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📌 Decision Tree: Which Model Should You Pick?

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• Strategic Intent
  • Founders may reflect on whether long-term control over underwriting, pricing, and collections aligns with their thesis. Greater control often points toward the NBFC path, while facilitation models may be sufficient in the early stages.
• Capital Readiness and Risk Appetite
  • The ability to commit minimum NOF and absorb credit risk typically influences whether an NBFC structure is feasible, while lighter-capital approaches often begin as LSPs.
• Time-to-Market Priorities
  • Where rapid launch or distribution lock-ins are critical, an LSP route may provide speed, with an NBFC license considered over time.
• Partner Dependence vs. Autonomy
  • Lending under an RE’s framework offers quicker entry but less autonomy. Founders seeking greater independence in risk and product design may lean toward an NBFC path.
• Compliance and Governance Capacity
  • Building an NBFC requires teams equipped for compliance, risk, audit, and tech-security obligations. Where these capabilities are still evolving, an LSP route may be more practical at first. </aside>

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🏢 Other important relevant regulations

1. Master Direction on Managing Risks and Code of Conduct in Outsourcing of Financial Services (2025): This direction mandates that the Board and Senior Management retain ultimate responsibility for outsourcing, requiring them to approve comprehensive risk frameworks and conduct rigorous due diligence on service providers' financial and operational capabilities. It emphasizes the necessity of clear, enforceable contracts that safeguard customer confidentiality, ensure business continuity, and grant the RE and RBI effective audit rights. Additionally, REs must maintain centralized records of these arrangements, perform periodic performance reviews, and publicly disclose any service provider terminations to prevent continued customer interaction.

2. The Reserve Bank of India Co-Lending Arrangements Directions, 2025 to provide a comprehensive regulatory framework for co-lending arrangements (CLA between regulated entities (REs). The Co-Lending Directions 2025 shall come into force from January 1, 2026, or from any earlier date as decided by a RE as per its internal policy. Any new co-lending arrangements entered into after the effective date must comply with these directions. In comparison with the existing RBI circular on Co-Lending by Banks and NBFCs to Priority Sector (“2020 Co-Lending Circular”), The Co-Lending Directions 2025 prescribe comprehensive disclosure requirements by elaborately setting out the roles and responsibilities of each RE, covering areas such as sourcing, servicing and customer interface.

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⚠️ Note the disclaimers regarding the document's limitations and the need for professional legal advice.

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While regulatory compliance is the foundation, true sustainability in lending comes from building trust, managing investor expectations, and fostering long-term resilience. Return to the Toolkit Homepage to revisit core compliance steps or explore the Compliance Journey Flow at a glance.

Need clarification on terminology? Refer to our comprehensive Glossary.