The Reserve Bank of India (RBI) on November 28, 2025, released the Reserve Bank of India (Small Finance Banks – Resolution of Stressed Assets) Directions, 2025, for public comments. The provides a comprehensive framework for the early identification, reporting, and time-bound resolution of stressed assets by Small Finance Banks (SFBs). It aims to harmonize existing norms on restructuring, compromise settlements, and technical write-offs to ensure consistency and transparency in the treatment of stressed exposures. The framework also introduces uniform regulatory guidance on changes to the Date of Commencement of Commercial Operations (DCCO) for projects in infrastructure and non-infrastructure sectors, thereby strengthening credit discipline and reducing systemic risks.
The Directions lay down detailed definitions and processes for handling default, credit events, restructuring, compromise settlements, and technical write-offs. They require banks to adopt a structured resolution process within specified review periods and introduce the concept of Review Period, Monitoring Period, and Specified Period to ensure timely action and sustainable restructuring outcomes. The framework recognizes compromise settlements as valid resolution mechanisms and stipulates prudential treatment of restructured exposures, additional provisioning requirements, and classification norms to prevent regulatory arbitrage. Special provisions are included for MSME accounts and projects under implementation to ensure flexibility while maintaining prudence.
Additionally, the Directions address participation of SFBs in Government Debt Relief Schemes (DRS), outlining principles and model procedures to mitigate moral hazard, ensure fiscal responsibility, and align government, lender, and borrower interests. The framework also clarifies the prudential treatment of instruments acquired as part of restructuring and provides regulatory exemptions in specific cases. Collectively, these Directions seek to promote a disciplined, time-bound, and transparent resolution ecosystem for SFBs while protecting financial stability.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/196 DOR.STR.REC.115/21.04.048 /2025-26]
