The RBI on Monday proposed a unified framework for the sale of loans that covers standard, sub-standard and non-performing assets (NPAs) as part of an exercise to deepen the market for lending.

The RBI said loan sales may be done for reasons ranging from strategic sales to the rebalance of exposures and to achieve the resolution of stressed assets by extinguishing exposures.

At present, the guidelines for the sale of loan exposures, both standard as well as stressed exposures, are spread across various circulars.

“A dynamic secondary market for bank loans will also ensure proper discovery of credit risk pricing associated with each exposure and will be useful as a leading indicator for impending stress, if any, provided that the volumes are sufficiently large,” the RBI said.

The draft guideline deals with various issues such as asset classification of the loan to be transferred, nature of the entity purchasing loan and the mode of transfer of loans.

According to the draft framework, standard assets would be sold through assignment or a loan participation contract.