The Reserve Bank of India (RBI) on December 28, 2023, issued the Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021.
The following has been stated:
• Applicability and Purpose:
1) These directions will be applicable to all loan transfers undertaken by the lenders as mentioned in Clause 3, including the sale of loans through novation or assignment, and loan participation.
Provided that in cases of loan transfers other than loan participation, legal ownership of the loan shall be mandatorily transferred to the transferee(s) to the extent of economic interest transferred.
2) It states that NBFCs which are required to comply with Indian Accounting Standards (IndAS) shall continue to be guided by the Standards and the advisories issued by the Institute of Chartered Accountants of India (ICAI Advisories) in case of any inconsistencies between these directions and the Standards.
• Transfer of stressed loans:
1) The instructions contained in this Chapter would cover the transfer of stressed loans, including transfer to ARCs.
2) The transfer of stressed loans must be done through assignment or novation only; loan participation is not permitted in the case of stressed loans.
This notification will come into force from December 28, 2023.
[Notification No DOR.STR.REC.52/21.04.048/2021-22]
