RBI/DOR/2025-26/159
DOR.STR.REC.No.78/21.04.048/2025-26
November 28, 2025
Reserve Bank of India (Commercial Banks - Transfer and Distribution of Credit Risk) Directions, 2025
Table of Contents
Chapter I - Preliminary
PART A - TRANSFER OF LOAN EXPOSURES
Chapter I - Scope and Definitions
Chapter II - General Conditions applicable for all loan transfers
Chapter III -Transfer of Loans which are not in default
Chapter IV - Transfer of stressed loans
PART B: CO-LENDING ARRANGEMENTS (CLAs)
Chapter I - Scope and Definitions
Chapter II - Prudential Norms
PART C - OTHER TYPES OF LENDING AND RISK TRANSFER ARRANGEMENTS
Chapter I – Lending under Consortium / Multiple Banking Arrangements
Chapter II – Inter-Bank Participations
Chapter III – Transfer of Borrower Accounts at the Request/Instance of Borrower
PART D: REPEAL AND OTHER PROVISIONS
Annex I
Annex II
Annex III
Introduction
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, inter-bank participations, consortium arrangements and others. In this regard, the Reserve Bank issued a comprehensive, self-contained set of regulatory guidelines covering different modes of credit risk transfer and distribution. Accordingly, in exercise of powers conferred by sections 21 and 35A of the Banking Regulation Act, 1949, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.
Chapter I - Preliminary
A. Short title and commencement
- These directions shall be called the Reserve Bank of India (Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025.
- These Directions shall come into effect on the day it is placed on the official website of the Reserve Bank of India.
Provided that, the Directions under Part B shall come into force from January 1, 2026, or from any earlier date as decided by a bank 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.
B. Applicability
3. These Directions shall be applicable to commercial banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').
For the purpose of these Directions, ‘Commercial Banks’ mean banking companies (other than Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as defined respectively under clauses (c), (da), and (nc) of Section 5 of the Banking Regulation Act, 1949.
C. Definitions
4. The terms have been defined in the respective Parts of this Direction.
5. All other expressions, unless defined in the respective parts, shall have the same meaning as have been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934 or any statutory modification or re-enactment thereto or any other relevant regulation or as used in commercial parlance, as the case may be.
PART A - TRANSFER OF LOAN EXPOSURES
6. Loan transfers are essential to the development of a credit risk market, enabling diversification of credit risk originating in the financial sector and ensure the availability of market-based credit products for a diversified set of investors having commensurate capacity and risk appetite.
Chapter I - Scope and Definitions
A. Applicability and Purpose
7. Banks shall acquire loans only from a transferor specified as a lender in paragraph 13(4) unless specifically permitted.
8. Overseas branches of banks shall be permitted to:
- (1) Acquire only ‘not in default’ loan exposures from a financial entity operating and regulated as a bank in the host jurisdiction.
- (2) Transfer exposures ‘in default’ as well as ‘not in default’ pertaining to resident entities to a financial entity operating and regulated as a bank in the host jurisdiction.
- (3) Transfer exposures ‘in default’ as well as ‘not in default’ pertaining to non-residents, to any entity regulated by a financial sector regulator in the host jurisdiction.
- (4) Such acquisitions or transfers shall be in strict compliance with paragraph 27 of these directions.
- No bank shall undertake any loan transfers or acquisitions other than those permitted under Part A of this direction and in the manner prescribed therein.
Explanation: The above proviso shall be without prejudice to the provisions of
Reserve Bank of India (Commercial Banks – 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.
- The directions in Part A will be applicable to all loan transfers undertaken by the bank, including transfer of loans through novation or assignment, and loan participation.
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.
- These directions shall apply only to banks as transferor(s) or transferee(s) in loan transfers, unless specifically made applicable to other categories of entities as transferee(s) as per the specific permissions as per Paragraphs 60 and 64.
- In respect of transferee(s) other than lenders mentioned in paragraph 13(4) and Asset Reconstruction Companies (ARCs), which are also financial sector entities, the prudential norms, including asset classification and provisioning post the transfer shall be as per the respective regulatory frameworks laid down by the respective financial sectoral regulators, viz., Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority, and International Financial Services Centres Authority.
B. Definitions
13. For the purpose of the Part A of these Directions, following definitions shall apply:
- (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;
Provided that for revolving facilities like cash credit, default would also mean, without prejudice to the above, the outstanding balance remaining continuously in excess of the sanctioned limit or drawing power, whichever is lower, for more than 30 days.
- (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; Small Finance Banks; Non-Banking Finance Companies (NBFCs) including Housing Finance Companies (HFCs).
Provided that Regional Rural Banks; Local Area 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.
- (6) “minimum holding period (MHP)” means the minimum period for which a transferor must hold the loan exposures before the same is transferred to transferee(s);
- (7) “net book value (NBV)” means the funded outstanding in a loan exposure reduced by the specific provisions made against such exposure;
- (8) “permitted transferees” mean the lenders specified below:
Scheduled Commercial Banks, All India Financial Institutions (NABARD, NHB, EXIM Bank, SIDBI and NaBFID), Small Finance Banks; and Non-Banking Finance Companies (NBFCs) including Housing Finance Companies (HFCs).
- (9) “personal loans” refer to loan exposures as defined in the
RBI circular DBR.No.BP.BC.99/08.13.100/2017-18 dated January 4, 2018
.
Explanation: A loan shall be categorised as personal loan if it falls within the purview of the above definition, even if such loans are not explicitly classified so in any regulatory/ supervisory reporting.
- (10) “portfolio” means a set of loan exposures transferred together at a point of time under the same transfer agreement;
Provided that transfer agreements under which loans are transferred as a portfolio shall list the details of the individual loan exposures which are transferred as a portfolio.
- (11) “stressed loans” mean loan exposures that are classified as non-performing assets (NPA) or as special mention accounts (SMA);
- (12) “time of transfer” means the point at which the associated risks and rewards, to the extent of economic interest transferred and as documented in the loan participation, assignment, or novation contract, become binding on the transferor and transferee.
- (13) “transfer” means a transfer of economic interest in loan exposures by the transferor to the transferee(s), with or without the transfer of the underlying loan contract, in the manner permitted in Part A of these directions;
Explanation: Consequently, the transferee(s) shall “acquire” the loan exposures following a loan transfer.
- (14) “transferee” means the entity to which the economic interest in a loan exposure is transferred under Part A of these directions;
Provided that a transferee shall not be a person disqualified in terms of Section 29A of the Insolvency and Bankruptcy Code, 2016;
Provided further that in case of transfer of loan exposures of borrowers in whose accounts instances of fraud have been detected by any lender, the transferee(s) shall neither belong to the existing promoter group of such borrower nor shall be a subsidiary / associate / related party etc. (domestic as well as overseas) of any person belonging to the existing promoter group of such borrower.
Explanation I: In market parlance, transferee may be alternatively referred to as the assignee under assignment transactions and participant under loan participations, wherever applicable.
Explanation II: For the purpose of the second proviso above, the term ‘promoter group’ shall have the same meaning as in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; and the term ‘related party’ shall have the same meaning as in the Insolvency and Bankruptcy Code, 2016.
Explanation III: The responsibility for verifying and establishing that the transferee(s) comply with the above provisos shall be with the transferor(s).
- (15) “transferor” means the entity which transfers the economic interest in a loan exposure under these directions;
Explanation: In market parlance, transferor may be alternatively referred to as the assignor under assignment transactions and grantor under loan participations, wherever applicable
