The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Rural Co-operative Banks – Transfer and Distribution of Credit Risk) Directions, 2025.
The following has been stated namely: -
• It aims to enhance the financial stability of RCBs by providing clear directives on the transfer and distribution of credit risk associated with loan exposures.
• The directions apply to State and Central Co-operative Banks as defined under the National Bank for Agriculture and Rural Development (NABARD) Act, 1981. They mandate that RCBs can only acquire loans from specified transferors and are restricted to acting as transferors of stressed loans, not as transferees, except under specific conditions. This ensures that RCBs engage in loan transfers in a controlled and prudent manner.
• The guidelines specify that legal ownership of loans shall be transferred to the transferee to the extent of the economic interest transferred, thereby clarifying the responsibilities and rights of each party involved in the transaction. Additionally, the directions outline the conditions under which credit enhancements, such as guarantees, can be utilized to mitigate credit risk, ensuring that such arrangements are transparent and legally enforceable.
• By instituting these directions, the RBI seeks to promote sound credit risk management practices within RCBs, thereby contributing to the overall stability and resilience of the rural banking sector.
• This shall come into force from November 28, 2025.
[Notification no. - RBI/DOR/2025-26/307 DOR.STR.REC.226/21.04.048 /2025-26]
