Reserve Bank of India (Commercial Banks, Resolution of Stressed Assets) Directions, 2025

What it does

The Directions, RBI/DOR/2025-26/165, set out how a commercial bank must handle a loan that has gone into stress. The site's note on the SARFAESI clock records that on 28 November 2025 the Reserve Bank issued entity-wise Directions to replace the scattered circulars that had governed stressed-asset work. For banks, the instrument is this one. It folds the restructuring norms, the compromise settlement and technical write-off framework, the treatment of changes in the date of commencement of commercial operations for project loans, and the prudential treatment of government debt relief schemes into a single document.

The text on the Reserve Bank's website is updated from time to time, and the version cited by the site's note is the one as updated on 1 October 2026.

Who it binds

Commercial banks, which is the title of the instrument. Parallel Directions of the same date apply to non-banking financial companies, urban co-operative banks, regional rural banks, small finance banks, local area banks and All India Financial Institutions, so a borrower with several lenders may be dealing with several instruments. The Directions bind the bank and not the borrower directly, but they decide what the bank may offer a borrower and on what terms.

What has changed, and when

The Directions are a consolidation and not a new policy. The site's note records that the substance of the 2019 prudential framework survives: the thirty-day review period after default, the 180-day window to implement a resolution plan, the inter-creditor threshold of 75 per cent by value and 60 per cent by number, and additional provisioning of 20 per cent and then 35 per cent where the plan is not implemented in time. What the consolidation removes is the argument that a lender was following one circular rather than another.

On 29 April 2026 the Reserve Bank amended the Directions for non-banking financial companies to insert a chapter on resolution after a natural calamity, effective 1 July 2026. That change is in the NBFC instrument and not in this one.

What turns on it in practice

For banking, SARFAESI and Debts Recovery Tribunal work, the Directions fix the lender's clock before enforcement begins. Once an account is in default, the bank has a review period, and a resolution plan has a window in which to be implemented, and a plan that is not implemented in time attracts additional provisioning. A bank in that position has a reason to move toward either a real resolution or enforcement, and a borrower negotiating a plan is negotiating inside those dates.

The Directions also connect to the wilful defaulter regime. The Reserve Bank's Directions of the same date on the treatment of wilful defaulters and large defaulters provide that a borrower classified as a wilful defaulter may be restructured only as these Directions allow. A compromise is a further link: under the wilful defaulter Directions, the name comes off the list on a compromise only when the borrower has paid the compromise amount in full, so the terms of a compromise under this instrument carry consequences under the other.

Three questions recur. Whether the account is a non-performing asset or still in the review period, because the options differ. Whether a proposed plan satisfies the thresholds for the lenders' agreement. And whether any penal charge in the account is a charge and not an addition to the rate of interest, since the note records that penal charges since the Reserve Bank's circular of 18 August 2023 cannot be capitalised.

The glossary terms that rest on this instrument on the site, large defaulter, non-performing asset, penal charges and wilful defaulter, are the vocabulary of that lender-side clock.