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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Reserve Bank of India (Urban Cooperative Banks - Transfer and Distribution of Credit Risk) Directions, 2025

28-Nov-2025 | RBI/DOR/2025-26/282 DOR.STR.REC.201/21.04.048/2025-26

RBI has issued RBI (Urban Cooperative Banks - Transfer and Distribution of Credit Risk) Directions, 2025 effective from 28th November 2025. Key Highlights: 1. Applicability - All Urban Co-operative Banks (UCBs), meaning Primary Co-operative Banks as defined under the Banking Regulation Act. 2. Board-Approved Policy Required - Every UCB must create a Board-approved policy covering due diligence, valuation, IT systems, risk management, and independence between loan origination and loan transfer teams. 3. Servicing Facility Rules - If the transferor continues servicing the loan, it must be done on arm's-length terms, without providing credit enhancement, and cash flows must be held separately in trust. 4. Clear Rules for Transferring Stressed Loans & NPAs - Stressed loans must be transferred only through assignment/novation. Valuation must follow Board-approved methods, with two external valuations for exposures of Rs. 100 crores. 5. Swiss Challenge Method for Large Exposures - For borrowers with exposure of Rs. 100 crores or more, bilateral deals must be followed by a Swiss Challenge auction to maximise price discovery. 6. Consortium / Multiple Banking Rules - Under consortium or multi-bank lending, UCBs must strengthen information sharing, obtain borrower declarations of existing credit facilities, exchange account conduct quarterly, and ensure compliance certification by professionals. For more information, please refer to the attached document.

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