Reserve Bank of India (Urban Co-operative Banks – Resolution of Stressed Assets) Directions, 2025 (Updated as on July 1, 2026)
UR
- Applies toUrban co-operative banks
- StatusIn force
- ImportanceMUST READ
- IssuedNov 28, 2025
- Last amendedJul 16, 2026 · 3 incorporated
- Length38 points in 5 sections · 4 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| 30 days | Lenders get 30 days from a default to review the account. RBI Para 5(14) |
| three months | A settlement paid over more than three months counts as restructuring. RBI Para 54 |
| 12 months | Banks must wait at least 12 months before lending again after a settlement. RBI Para 60 |
| July 1, 2026 | The version in force today was updated on July 1, 2026. RBI Para 120 |
What it says
Chapter I. Preliminary
Must know
1. 30-day review window
Lenders get 30 days from a default to review the account.
Do it
2. Bad loan rules for UCBs
This paper sets what urban co-operative banks must do when a borrower stops paying.
Background
3. Start date
These Directions came into effect on the day RBI issued them.
4. Who is covered
These Directions apply to every urban co-operative bank.
5. What default means
Default is non-payment of any part of a debt once it is due and payable.
6. What restructuring means
Restructuring is giving a borrower a concession because of financial difficulty.
7. A standby line for overruns
A standby credit facility is a line set at closure to meet a cost overrun.
8. Write-off is no waiver
A technical write-off is for the books only and waives no claim on the borrower.
Chapter II. General Requirements
Must know
1. Sanctioner cannot approve
An official who sanctioned the loan may not approve its compromise settlement.
Do it
2. Settlement policy approval
The Board must approve the bank's policy for compromise settlements.
3. Approval seniority rule
The officer approving a settlement must rank above whoever sanctioned the loan.
4. What the policy must hold
The Board policy must set out the objective grounds for relief to each kind of borrower.
5. Early stress flagging
Banks must flag loan stress right away as a special mention account.
6. Report to the utilities
Financial information must be filed with the insolvency information utilities.
7. Show it in the notes
The position must be disclosed in the notes to the accounts.
Background
8. Full Board approval
Settling with a fraud or wilful defaulter account needs the full Board's approval.
Chapter III. Prudential Norms Applicable to Restructuring
1. Cash basis for bad accounts
Interest on a restructured standard account is taken on accrual, on a bad one only in cash.
Chapter IV. Special Cases of Restructuring
Must know
1. Fraud accounts barred
Banks 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. 12-month lending gap
Banks must wait at least 12 months before lending again after a settlement.
BankPulse example. Suppose a settlement is agreed in March. The bank may not lend to that borrower again for at least 12 months. Its own board policy may set a longer wait, but never a shorter one. This does not cover farm credit.
Do it
5. Most recovery, least cost
A compromise settlement must aim at the most recovery at the least cost.
6. Report upward each quarter
Settlements and write-offs must be reported to the next higher authority each quarter.
7. Top approvals to Board
Compromise settlements and write-offs approved by the chief executive or a Board committee must be reported to the Board.
8. A cooling period after settlement
A cooling period set by the Board policy must pass before fresh exposure to that borrower.
9. Sign an inter-creditor pact
Where a plan is to be put in place, all lenders must sign an inter-creditor agreement.
10. What that pact covers
The pact must set out the rights of the majority and protect those who dissent.
11. Write the plan down
The plan must be clearly documented even where no term changes.
Background
12. Part settlement is restructuring
Any part settlement with the borrower also counts as restructuring.
13. The right to recover stays
A technical write-off does not weaken the right to recover from the borrower.
14. Measure against the original
After a part write-off, provisions and grading still work off the original exposure.
15. Board sets the farm gap
The cooling period for farm credit is set by the lender's own Board policy.
16. Cash settlement allowed
Banks can still settle for cash with fraud or wilful defaulter accounts.
17. Lender majority rule
Lenders holding 75% of the debt and 60% by number can bind all lenders.
Chapter VII. Repeal and Other Provisions
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.
How this rule has changed
The points above are the rule as it stands today, after every change listed here.
Issued on Nov 28, 2025. This is the date RBI put the rule out.
Changed on Apr 27, 2026.
- Meaning of financial difficulty. For financial difficulty meaning, use the same meaning given in the 2025 small finance bank stressed assets rules.
- Start date. These amendment rules will apply from April 1, 2027.
Changed on Apr 29, 2026.
- Natural calamity meaning. Natural calamity means an event marked under National Disaster Response Fund or State Disaster Response Fund schemes.
- Board policy update. Bank board policy must include rules for resolution under Chapter IV-A, covering aims, relief tools and approval powers.
- Earlier relief excluded. Accounts that already got relief on the effective date will follow old rules unless a new resolution is done later.
- Fresh resolution later. Any new resolution after the effective date in such earlier-relief accounts must follow this new Chapter IV-A.
Changed on Jul 16, 2026.
- Policy on SNFAs. Bank policy must cover how to buy and sell specified non-financial assets, with needed limits and controls.
- SNFA policy limits. Policy must set maximum share of specified non-financial assets in total assets and time limit up to seven years.
- Scope of Chapter V-A. All specified non-financial assets, including those from SARFAESI or bilateral deals, must follow this chapter.
- Legacy SNFA deadline. Old specified non-financial assets on September 30, 2026 must meet these rules by September 30, 2027.
The same subject for other kinds of institution
The same subject for other kinds of institution.
RBI stressed asset resolution rules for all India financial institutions
RBI stressed asset resolution rules for regional rural banks
RBI stressed asset resolution rules for rural co-operative banks
Other RBI rules for urban co-operative banks
RBI capital adequacy rules for urban co-operative banks 2025
RBI compliance officer and compliance function rules for urban co-operative banks
RBI concurrent audit rules for urban co-operative banks 2026
RBI credit bureau reporting rules for urban co-operative banks 2025
RBI credit card and debit card rules for urban co-operative banks 2025
RBI customer service and fair conduct rules for urban co-operative banks 2025
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