Lender

A lender is any individual, institution, or entity that provides funds to a borrower with the expectation of repayment of the principal amount along with agreed interest within a specified time frame — in exchange for accepting the credit risk that the borrower may default on the obligation. In India's formal financial system, lenders include: scheduled commercial banks (SBI, HDFC Bank, ICICI Bank), regional rural banks, cooperative banks, housing finance companies (HDFC Ltd, LIC Housing Finance), Non-Banking Financial Companies (Bajaj Finance, Muthoot Finance, Tata Capital), microfinance institutions (Bandhan, CreditAccess Grameen), and the National Housing Bank and NABARD as apex refinancing institutions. Each category of lender is regulated by a different authority — commercial banks by the RBI, housing finance companies by the NHB, and NBFCs by the RBI under different regulatory tiers based on size and systemic importance. Lenders assess borrower creditworthiness through CIBIL scores, income verification, collateral valuation, and debt-to-income ratios before extending credit. In the bond market, individual investors and institutional investors act as lenders when they purchase corporate bonds and government securities — effectively lending money to the issuer in exchange for periodic coupon payments and principal repayment at maturity. The lender's primary risk is credit risk (borrower default) — mitigated through collateral (secured lending), credit ratings, covenants, and diversification of the loan portfolio across multiple borrowers and sectors.