Reserve Bank of India (Urban Co-operative Banks – Transfer and Distribution of Credit Risk) Directions, 2025
RBI master-direction RBI/DOR/2025-26/282 · 28 Nov 2025
RBI master-direction RBI/DOR/2025-26/282 · 28 Nov 2025
Summary
Check the official recordThe Reserve Bank of India establishes a framework for Urban Co-operative Banks (UCBs) to manage credit risk through loan transfers. UCBs act only as transferors of stressed loans and cannot participate in other loan transfers. Banks must implement a Board-approved policy for loan transfers that ensures operational independence. For stressed loan exposures of 100 crore rupees or more, banks must obtain two external valuation reports. Bilateral negotiations for such exposures require a Swiss Challenge auction. Banks must report all loan transfer transactions to a notified trade reporting platform. These directions repeal previous instructions on credit risk transfer for UCBs. The directions take effect upon placement on the official website of the Reserve Bank of India.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/282 DOR.STR.REC.201/21.04.048/2025-26 November 28, 2025
Reserve Bank of India (Urban Co-operative Banks - Transfer and Distribution of Credit Risk) Directions, 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, 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 21, 35A and 56 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.
In this context, urban co-operative banks shall mean Primary Co-operative Banks as defined under section 5(ccv) read with Section 56 of Banking Regulation Act, 1949.
Explanation: The above proviso shall be without prejudice to the provisions of 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, 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;
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 (NABARD, NHB, EXIM Bank, SIDBI and NaBFID); 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 III of Part A of these directions and are not permitted as transferors(s) or transferee(s) in any other type of loan transfers.
(5) “net book value (NBV)” means the funded outstanding in a loan exposure reduced by the specific provisions made against such exposure;
(6) “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).
(7) “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.
(8) “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.
(9) “stressed loans” mean loan exposures that are classified as non-performing assets (NPA) or as special mention accounts (SMA);
(10) “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, assignment, or novation contract, become binding on the transferor and transferee.
(11) “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.
(12) “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;