Reserve Bank of India (Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025

1. Co-lending from January 2026

Part B on co-lending starts on January 1, 2026, or earlier if the bank chooses.

BankPulse example. A bank's own policy sets an earlier effective date for co-lending than January 1, 2026. The rules then bind it from that earlier date. A bank that sets no earlier date starts on January 1, 2026.

2. Co-lending start date

The co-lending rules start January 1, 2026, or earlier if a bank's own policy sets that.

3. Older arrangements keep old rules

Co-lending arrangements made before August 06, 2025 follow the earlier rules.

4. Nothing outside Part A

A bank may not transfer or buy loans in any way other than Part A allows.

5. Retention is not enhancement

Economic interest kept by the seller must not amount to credit enhancement.

6. Borrower consent needed

A transfer must not cut across the borrower's rights, and consents must be taken.

7. Six-month holding period

Loans with a tenor over 2 years need a 6-month holding period before they can be transferred.

8. Stressed loan sale modes

Banks can only sell stressed loans by assignment or novation, never by loan participation.

9. Two valuations above 100 crore

At 100 crore rupees or more the seller must get two outside valuation reports.

10. Swiss challenge above 100 crore

A bilateral deal at 100 crore rupees or more must go to a Swiss Challenge auction.

11. Twelve month cooling period

A fresh exposure on that borrower needs a cooling period of at least 12 months.

12. Six months before resale

A bank must hold a bought stressed loan for at least six months before selling it on.

1. Legal title moves too

Except in loan participation, legal ownership must pass to the buyer as well.

2. List each loan

A portfolio transfer agreement must list each loan exposure inside the portfolio.

3. Board policy for transfers

The bank must have a Board approved policy for transferring and buying loans.

4. Keep the two desks apart

Staff who transfer loans must be independent of the staff who originate them.

5. KYC and outsourcing still apply

The outsourcing rules and the KYC Directions must be followed in every case.

6. Hold the cash in trust

The bank must hold the cash flows in trust and not mix them with its own.

7. Partial-check risk retention

If a bank only partly checks a loan portfolio, it must keep at least 10% of the risk itself.

8. Buyer signs the agreement

The transfer papers must say the buyer will sign the creditors' agreement when needed.

9. Co-lending retention floor

In a co-lending deal, a bank must keep at least 10% of each loan on its own books.

1. Loan transfer rules

This document sets the rules for transferring loans and distributing credit risk between lenders.

2. New co-lending follows Part B

Any co-lending arrangement made after the effective date follows Part B.

3. Buy only from a lender

A bank may buy loans only from a transferor listed as a lender.

4. What foreign branches may buy

An overseas branch may buy only loans that are not in default, from a bank there.

5. Banks on either side

These rules bind a bank whether it is the seller or the buyer of the loan.

6. Transfer rule scope

The loan transfer rules apply only when a bank is the transferor or the transferee.

7. Participation looks to the borrower

In loan participation the buyer's exposure is to the borrower, not to the seller.

8. Capital follows the interest held

Each side holds capital against the economic interest it holds after the transfer.

9. No recourse to the seller

The buyer has no recourse to the seller for loss on the interest transferred.

10. Full capital if rules missed

Where the rules are not met, the buyer holds capital equal to the whole exposure.

11. Failed transfer stays on books

If the conditions fail, the seller keeps the loan on its books and books an advance.

12. Unrealised gain off capital

Unrealised profit on such a transfer comes off CET 1 capital until the loans mature.

13. Loss hits this year's account

A sale below net book value is charged to the profit and loss account of that year.

14. Full risk weight on NPAs

A bad loan bought from another lender carries a 100% risk weight while it is standard.

15. No dividend from that gain

The non cash part of an excess provision comes off CET 1 and pays no dividend.

16. Government backed receipts valued

Security receipts backed by the Government are valued on the net asset value declared.

17. One rupee after the guarantee

A security receipt left after the guarantee ends is valued at one rupee.

18. Co-lending scope

Co-lending rules cover tie-ups between banks and other banks, financial institutions or NBFCs.

19. Old actions preserved

Action already started under the old rules stays governed by those old rules.