Reserve Bank of India (Non-Banking Financial Companies – Resolution of Stressed Assets) Directions, 2025 (updated as on July 1, 2026)

1. Settlement recognised

Settling for less money now counts as a valid way to resolve stress.

1. Part B coverage

Part B covers non-deposit NBFCs with assets under 500 crore rupees.

BankPulse example. An NBFC that does not take deposits has assets of 300 crore rupees. That is less than 500 crore, so Part B applies to it. An NBFC with 700 crore of assets is outside Part B.

2. Bad loan rules for NBFCs

This paper sets what non-banking financial companies must do when a borrower stops paying.

3. Start date

These Directions came into effect on the day RBI issued them.

4. Who is covered

These Directions apply to every non-banking financial company.

5. Core Investment Companies exempt

Core Investment Companies do not have to follow these Directions.

6. Part A coverage

Part A covers big NBFCs and any deposit-taking NBFC.

1. 30-day review window

NBFCs get 30 days from a default to review the account.

2. Twenty per cent repaid

The specified period runs until a fifth of the principal and capitalised interest is repaid.

3. Sanctioner cannot approve

An official who sanctioned the loan may not approve its compromise settlement.

4. Equity is left out

Only equity and paper that must turn into equity is left out of principal debt.

5. What the policy must hold

The Board policy must set out the objective grounds for relief to each kind of borrower.

6. Add ratios to the list

The list of difficulty signs must be filled out with key ratios and working measures.

7. Approval seniority rule

The officer approving a settlement must rank above whoever sanctioned the loan.

8. Report to the utilities

Financial information must be filed with the insolvency information utilities.

9. Show it in the notes

The position must be disclosed in the notes to the accounts.

10. What default means

Default is non-payment of any part of a debt once it is due and payable.

11. What residual debt means

Residual debt is the principal all the lenders will still hold under the plan.

12. What restructuring means

Restructuring is giving a borrower a concession because of financial difficulty.

13. A standby line for overruns

A standby credit facility is a line set at closure to meet a cost overrun.

14. Write-off is no waiver

A technical write-off is for the books only and waives no claim on the borrower.

15. Likely default counts too

A borrower not yet in default counts if default is likely without the concession.

16. Full Board approval

Settling with a fraud or wilful defaulter account needs the full Board's approval.

17. SMA concealment penalty

Hiding SMA status brings faster provisioning or other RBI action.

18. Penalty for concealment

Hiding a loan's real health can bring RBI fines and stricter provisioning.

1. Five hundred crore needs two

An exposure of ₹500 crore or more needs two independent credit checks; others need one.

2. Grading does not pause

Re-grading of an asset must not stop just because a plan is being considered.

3. 180-day implementation window

Lenders get 180 days from review start to make the plan work.

4. Below fifteen hundred crore

Chapter IV does not apply to an account with total exposure below ₹1,500 crore.

5. Review together on default

Once one lender reports default, all the lenders must review the account together.

6. Decide the way forward

During the review period the lenders must jointly settle the resolution strategy.

7. Sign an inter-creditor pact

Where a plan is to be put in place, all lenders must sign an inter-creditor agreement.

8. What that pact covers

The pact must set out the rights of the majority and protect those who dissent.

9. Write the plan down

The plan must be clearly documented even where no term changes.

10. All opinions must clear RP4

Where extra opinions are taken, every one must be RP4 or better for the plan to go ahead.

11. Lenders hire the agency

The rating agency must be engaged and paid by the lenders themselves.

12. Lender majority rule

Lenders holding 75% of the debt and 60% by number can bind all lenders.

13. Minimum RP4 rating

Only resolution plans rated RP4 or better for the leftover debt can proceed.

14. Exit means fully paid out

A plan built on exit or recovery counts as done only when the exposure is fully extinguished.

1. Capped at the whole amount

Total provisions held are capped at a hundred per cent of the amount outstanding.

2. Recovery action needs provision

Extra provision is needed once recovery proceedings start, until they are complete.

1. Two ratings above five hundred

An upgrade needs two ratings above ₹500 crore and one below it.

2. Fifteen per cent more

An extra provision of fifteen per cent is made at the end of the review period.

3. No reversal at that stage

Excess provisions may not be written back when the plan goes for approval.

4. Twenty-six per cent needed

The new promoter must hold at least 26 per cent and be the single largest shareholder.

5. All must be investment grade

Where more ratings are taken, every one must be investment grade to allow an upgrade.

6. Make up any shortfall

Where provisions held fall short of what is expected, the gap must be filled.

7. New promoter must be clean

The lender must establish that the new promoter is not linked to the old one.

8. And must be in control

The new promoter must also be in control as the company and securities law define it.

9. Downgrade on restructuring

A healthy loan is downgraded the moment it gets restructured.

10. Grade does not improve

A bad account keeps the same grade after restructuring as it had before.

11. New money follows the account

New finance takes the account's grade if it fails during the watch period.

12. Freeze ends on rejection

The freeze on provisions ends at once if the plan is rejected.

13. Cash basis for bad accounts

Interest on a restructured standard account is taken on accrual, on a bad one only in cash.

14. Failure restarts the clock

If the account fails during the watch period, a fresh review period begins.

1. Fraud accounts barred

NBFCs cannot restructure loans linked to fraud or wilful default.

2. Settlement is not a right

A borrower cannot demand a compromise settlement; it is the lender's judgement.

3. Three months makes restructuring

A settlement paid over more than three months counts as restructuring.

4. Most recovery, least cost

A compromise settlement must aim at the most recovery at the least cost.

5. Report upward each quarter

Settlements and write-offs must be reported to the next higher authority each quarter.

6. Top approvals to Board

Compromise settlements and write-offs approved by the chief executive or a Board committee must be reported to the Board.

7. A cooling period after settlement

A cooling period set by the Board policy must pass before fresh exposure to that borrower.

8. Part settlement is restructuring

Any part settlement with the borrower also counts as restructuring.

9. The right to recover stays

A technical write-off does not weaken the right to recover from the borrower.

10. Measure against the original

After a part write-off, provisions and grading still work off the original exposure.

1. Latest update

The version in force today was updated on July 1, 2026.

2. Older rules repealed

This document repeals all earlier stressed-asset rules for commercial banks.

3. Old cases continue

Action already taken under the old rules stays governed by them.

4. Relation to other laws

These Directions add to other laws; they do not cancel any of them.