Reserve Bank of India (All India Financial Institutions – Transfer and Distribution of Credit Risk) Directions, 2025
RBI master-direction RBI/DOR/2025-26/327 · 28 Nov 2025
RBI master-direction RBI/DOR/2025-26/327 · 28 Nov 2025
Summary
Check the official recordThe Reserve Bank of India establishes a framework for All India Financial Institutions (AIFIs) regarding credit risk transfer, loan distribution, and co-lending arrangements. AIFIs must adopt board-approved policies for loan transfers, ensuring due diligence and risk management. The directions mandate minimum holding periods for loans before transfer and prohibit credit enhancements. For stressed loans, the framework prescribes valuation methods, including the Swiss Challenge method for large exposures. Co-lending arrangements require a minimum 10 percent retention by the AIFI and specific disclosure standards. These directions take effect upon publication, with specific provisions for co-lending arrangements commencing on January 1, 2026.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/327 DOR.STR.REC.246/21.04.048/2025-26 November 28, 2025
Credit Risk Transfer and Distributions are resorted to by lending institutions for multitude of reasons ranging from liquidity management and rebalancing their exposures or strategic sales. RBI has been taking several steps towards its development through Directions/ Guidelines on transfer of loan exposures, Co-lending arrangements, consortium arrangements and others. In this regard, the Reserve Bank hereby issues a comprehensive and self-contained framework of regulatory guidelines governing different avenues of credit risk transfer and distribution. Accordingly, in exercise of powers conferred by section 45L of the Reserve Bank of India Act, 1934; the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.
Provided that, the Directions under Part B shall come into force from January 1, 2026, or from any earlier date as decided by an AIFI as per its internal policy (“effective date”). Any new Co-Lending Arrangements (CLAs) entered into after the effective date shall be in compliance with the directions under Part B.
Provided further that existing CLAs (i.e., the lending arrangements executed before August 06, 2025) and new CLAs entered into prior to the effective date shall be in compliance with the extant regulations.
Explanation: The above proviso shall be without prejudice to the provisions of Reserve Bank of India (All India Financial Institutions – Securitisation Transactions) Directions, 2025; Master Direction – External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019; obtention of guarantees; or products explicitly permitted in terms of RBI guidelines.
Provided that in cases of loan transfers other than loan participation, legal ownership of the loan shall be mandatorily transferred to the transferee(s) to the extent of economic interest transferred.
(1) “credit enhancement” means a contractual arrangement in which an entity provides some degree of added protection to other parties to a transaction so as to mitigate the credit risk of their acquired exposures;
(2) “default’ means non-payment of debt (as defined under the Insolvency and bankruptcy Code, 2016) when whole or any part or instalment of the debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be;
(3) “Economic Interest” refers to the risks and rewards that may arise out of loan exposure through the life of the loan exposure;
(4) “Lenders” shall include the following set of entities,
Scheduled Commercial Banks; Regional Rural Banks; Local Area Banks; Primary (Urban) Co-operative Banks; State Co-operative Banks/ Central Co-operative Banks; All India Financial Institutions (NABARD, NHB, EXIM Bank, SIDBI and NaBFID); Small Finance Bank; Non-Banking Finance Companies (NBFCs) including Housing Finance Companies (HFCs).
Provided that Regional Rural Banks; Local Areas Banks and Primary (Urban) Co-operative Banks/State Co-operative Banks/ Central Co-operative Banks are permitted as only transferor(s) of stressed loans under Chapter IV of Part A of these directions and are not permitted as transferors(s) or transferee(s) in any other type of loan transfers.
(5) “loan participation” means a transaction through which the transferor transfers all or part of its economic interest in a loan exposure to transferee(s) without the actual transfer of the loan contract, and the transferee(s) fund the transferor to the extent of the economic interest transferred which may be equal to the principal, interest, fees and other payments, if any, under the transfer agreement;
Provided that the transfer of economic interest under a loan participation shall only be through a contractual transfer agreement between the transferor and transferee(s) with the transferor remaining as the lender on record.
Provided further that in case of loan participation, the exposure of the transferee(s) shall be to the underlying borrower and not to the transferor. Accordingly, the transferor and transferee(s) shall maintain capital according to the exposure to the underlying borrower calculated based on the economic interest held by each post such transfer. The applicable prudential norms, including the provisioning requirements, post the transfer, shall be based on the above exposure treatment and the consequent outstanding.