The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Local Area Banks - Transfer and Distribution of Credit Risk) Directions, 2025.
The following has been stated: -
•The RBI Directions, 2025, provide a comprehensive framework for Local Area Banks (LABs) on the transfer and distribution of credit risk, covering general loan transfers and stressed loans.
•They specify definitions, permissible transferors/transferees, valuation, due diligence, and operational norms, including the Swiss Challenge Method for price discovery.
•Transfers must ensure full transfer of economic interest, compliance with legal obligations, and proper reporting, with detailed provisions for Asset Reconstruction Companies (ARCs).
•The Directions repeal previous guidelines but maintain continuity for actions taken under them, without affecting other laws.
•These directions shall become effective on November 28, 2025.
[Notification No.: RBI/DOR/2025-26/234 DOR.STR.REC.153/21.04.048 /2025-26]
