The Reserve Bank issued master direction on transfer of loan on September 24, 2021. The new mandate necessitates the requirement for banks and other lending entities to put in place a comprehensive and board approved policy for loan transfer transactions. As per the RBI, the provisions of this direction on rules for loan transfer shall be applicable from the date of issue, i.e., 24 September 2021. It may be noted that these provisions shall apply for banks as well as NBFCs.
The transfer of loan is done by lending institutions for different reasons such as for liquidity management, rebalancing their exposures or strategic sales. A robust secondary market in loans can help in management of credit exposures by lending institutions and create additional avenues for enhancing liquidity. Hence the RBI stated it was necessary to lay down comprehensive regulatory guidelines governing transfer of loans.
Parallelly the Reserve Bank issued another Master Direction on RBI (Securitisation of Standard Assets) Directions 2021. Here the Minimum Retention Requirement for different classes of assets was specified. It is believed that these measures (changes in rules for loan transfer) can bring improvement in the liquidity of lenders and help them in rebalancing their exposures. You may refer to the RBI Master Direction on transfer of loan exposures directions 2021 attached with this article.
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