Reserve Bank of India (Non-Banking Financial Companies - Transfer and Distribution of Credit Risk) Directions, 2025

RBI/DOR/2025-26/352 DOR.STR.REC.271/21.04.048/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Non-Banking Financial Companies - Transfer and Distribution of Credit Risk) Directions, 2025 (Updated as on July 01, 2026) 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 Chapter I - Scope and Definition Chapter II - Prudential Norms PART C: REPEAL AND OTHER PROVISIONS

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, 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 sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934; sections 30A, 32 and 33 of the National Housing Bank Act, 1987; and section 6 of the Factoring Regulation Act, 2011, 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

1. These directions shall be called the Reserve Bank of India of India (Non-Banking Financial Companies – Transfer and Distribution of Credit Risk) Directions, 2025.

2. These Directions shall come into effect on the day it is placed on the official website of the Reserve Bank of India 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 NBFC as per its internal policy (“effective date”). Any new CLA 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 the following Non-Banking Financial Companies (hereinafter collectively referred to as ‘NBFCs’ and individually as an ‘NBFC’), for all layers unless specified otherwise :

(i) NBFC-D registered with the RBI under the provisions of the RBI Act, 1934;

(ii) NBFC-ICC registered with the RBI under the provisions of the RBI Act, 1934;

(iii) NBFC-Factor registered with the RBI under the provisions of the Factoring Regulation Act, 2011;

(iv) NBFC-MFI registered with the RBI under the provisions of the RBI Act, 1934;

(v) NBFC-IFC registered with the RBI under the provisions of the RBI Act, 1934;

(vi) IDF-NBFC registered with the RBI under the provisions of the RBI Act, 1934;

(vii) HFC registered with the RBI under the provisions of the NHB Act, 1987;

These Directions are not applicable for the following:

(i) MGC registered with RBI under the scheme of Registration of Mortgage Guarantee Companies

(ii) NBFC-P2P registered with the RBI under the provisions of the RBI Act, 1934;

(iii) NBFC-AA registered with the RBI under the provisions of the RBI Act, 1934;

(iv) CIC registered with the RBI under the provisions of the RBI Act, 1934;

(v) SPD registered with the RBI as NBFCs under the provisions of the RBI Act, 1934;

(vi) NOFHC registered with the RBI as NBFC under the provisions of the RBI Act, 1934;

(vii) 1[NBFC holding Certificate of Registration as ‘Type I NBFC’];

(viii) ‘NBFCs in Base layer having customer interface but not availing public funds’.

Note:

The applicability under these Directions is in line with the regulatory structure for NBFCs as set out in Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.

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 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. NBFCs, shall acquire loans only from a transferor specified as a lender in paragraph 12(4) unless specifically permitted.

8. No NBFC 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 (Non-Banking Financial Companies – Securitisation Transactions) Directions, 2025; obtention of guarantees; or products explicitly permitted in terms of RBI guidelines.

9. The directions in Part A will be applicable to all loan transfers undertaken by the NBFC, 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.

10. These directions shall apply only to NBFCs mentioned in paragraph 12(4) 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 58 and 62.

11. In respect of transferee(s) other than lenders mentioned in paragraph 12(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

12. 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;

(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).