Introduction

Co‑lending payments go beyond simple money transfers. They involve orchestrating disbursements, tracking repayments, splitting revenues, and ensuring compliance across multiple lenders, usually a bank and an NBFC. With so many moving parts, each rupee must be accurately traced and reconciled. In this blog, we explore the world of co‑lending payments covering settlements, repayments, and reconciliation and explain how technology is redefining these processes.

Understanding Co‑Lending

Co‑lending enables two lenders, typically a bank and an NBFC, to jointly fund loans. This collaboration combines the bank’s capital strength with the NBFC’s segment expertise. While the concept sounds simple, the payment lifecycle is anything but. Every loan disbursement, repayment, and revenue split must be clearly accounted for to satisfy both lenders' books and regulatory requirements. This creates a high-stakes operational challenge where manual tracking or spreadsheet-based reconciliation often falls short.

The Lifecycle of a Co‑Lending Payment

The payment flow in co‑lending can be broken into several stages. It begins with origination, where the NBFC or fintech acquires and underwrites the borrower, while the bank provides funding support. Disbursements are then executed, either via a joint escrow account or through virtual account arrangements that map funds to the correct lender share.

Repayments add another layer of complexity. A borrower’s single EMI must be split accurately between the bank and NBFC, factoring in principal, interest, fees, and penalties. Settlement follows, where the correct amounts are transferred to each lender, often on a T+0 or T+1 basis. Finally, detailed reporting and reconciliation ensure that every transaction is audit-ready and regulator-friendly.

Challenges in Settlements and Reconciliation

Managing co‑lending payments involves navigating a web of rules and exceptions. Borrowers often make partial payments, pre-payments, or foreclosures, each requiring recalculation of interest, fees, and lender splits. Chargebacks, mandate failures, and payment reversals further complicate this process.

Revenue-sharing models add another layer of complexity. Servicing fees, origination charges, and penal interest must be allocated correctly between lenders. Without a sophisticated, automated system, finance teams can quickly become overwhelmed, leading to errors, delays, and compliance risks.

Why Manual Systems Don’t Work

Excel sheets and manual reconciliations might work for a small portfolio, but they fail as volumes grow. Co‑lending programs often handle thousands of accounts, each with different payment schedules and rules. A manual approach can lead to mismatches, missed settlements, and poor borrower experiences. What’s needed is a payment system designed specifically to handle co‑lending complexity one that tracks every inflow, applies lender-specific rules, and generates accurate settlements in real time.

The Repayment Flow: From Borrower to Lenders

When a borrower makes an EMI payment, it enters a collection account linked to the co‑lending arrangement. The payment must then be broken down according to the repayment schedule and distributed to both lenders based on their agreed share, often 80:20 or 90:10.

This process doesn’t just involve principal and interest allocation. It must also consider penalties, overdue charges, and any pre-payments. Each transaction needs to be recorded against both lenders’ ledgers, with detailed MIS reports generated to maintain transparency and accuracy.

Real-world lending isn’t always predictable. Borrowers might pre-pay loans, triggering recalculations of outstanding interest and principal. Payments might bounce due to mandate failures or reversals, requiring adjustments to both lenders' ledgers. Without an automated reconciliation layer, these exceptions create operational bottlenecks, leading to delayed settlements and mismatched accounts.

Why Technology Matters in Co‑Lending Payments

The complexity of co‑lending isn’t just about volume it’s about precision. Technology can streamline fund flows by automating settlement schedules, applying allocation rules, and reconciling transactions in real time. Advanced payment infrastructure ensures lender-level clarity and reduces human errors, while also providing transparent, audit-ready data for regulators and partners.

Compliance, Reporting, and Risk Mitigation

Co‑lending is tightly regulated, which means every payment must be transparent, traceable, and documented. Regulators expect real-time reconciliation, daily settlement reporting, and fraud detection measures. Platforms that integrate compliance controls such as multi-bank redundancy and trustee-backed flows can reduce risk and provide operational resilience.

Detailed dashboards and automated SOAs (Statements of Account) are critical for ensuring that both lenders have access to the same version of the truth. This eliminates disputes and accelerates month-end closures.

Castler’s Role in Simplifying Co‑Lending Payments

In a fragmented payment landscape, Castler provides a unified platform for managing the entire co‑lending lifecycle from pay-ins to payouts to reconciliation. Rather than relying on multiple systems, Castler offers a compliance-first solution where every transaction is tracked, split, and settled accurately.

The platform’s smart pay-in capabilities such as UPI AutoPay, eNACH, and QR-based collections ensure that borrower payments are captured and mapped in real time. On the payout side, API-driven disbursements using NEFT, RTGS, IMPS, or UPI allow for quick and reliable settlements.

More importantly, Castler’s reconciliation engine handles lender-level tracking, revenue sharing, and exception cases without manual intervention. Daily MIS, lender-wise SOAs, and audit-ready trails give financial institutions complete visibility and confidence.

Conclusion

Co‑lending has immense potential to expand financial inclusion and lower the cost of credit. But without the right payment infrastructure, it can become a logistical nightmare. Accurate settlements, real-time reconciliation, and audit-ready reporting are no longer optional they’re critical for success.

Castler’s platform addresses these challenges by automating multi-lender fund flows, simplifying repayment tracking, and ensuring transparency at every step. 

To explore how Castler can help you build a scalable, compliant co‑lending ecosystem, get in touch with the Castler team.