RBI Amends Credit Facility Directions

RBI/2025-26/259 DOR.CRE.REC.451/07-01-002/2025-26 March 30, 2026 Reserve Bank of India (Small Finance Banks – Credit Facilities) Amendment Directions, 2026 (Revised) Please refer to Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025 (hereinafter referred to as ‘the Directions ’). 2. On a review, and in exercise of the powers conferred by the sections 21 and 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions (Revised) hereinafter specified. 3. The Amendment Directions (Revised) modify the Directions as under: 3(1) In paragraph 4(1) of ‘Chapter I - Preliminary’ of the Directions, the following modifications shall be effected: 3(1) (i) Sub-paragraph (vii) shall be substituted with the following: (vii) “Collateral security” or “Collateral” means an asset on which a security charge is created in favour of the lender for securing a credit facility. 3(1) (ii) The following sub-paragraphs shall be inserted: (va) “Capital Market Intermediaries (CMIs)” shall mean regulated entities undertaking trade execution and market infrastructure services in capital markets, including broking, clearing, custody, market making or other incidental services. Provided that CMIs shall not include Standalone Primary Dealers and Qualified Central Counterparty (QCCPs). (vb) "Cash and cash equivalents” shall include cash, balances held in demand and term deposits placed with the lending bank and investments in units of overnight mutual funds (with a minimum haircut of 10 per cent). (viiia) “Control” shall have the same meaning as defined in Section 2(27) of the Companies Act, 2013. (xivb) “Eligible Securities” shall include the following securities: (a) Listed Group-1 equity shares and preference shares; Explanation: Group 1 securities as defined under instructions issued by Securities and Exchange Board of India (SEBI) (b) Government Securities, including Treasury Bills and Sovereign Gold Bonds; (c) Listed Debt Securities, including Convertible Debt Securities, rated BBB or higher; Explanation: Debt securities as defined under Section 2(1)(k) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 dated August 9, 2021, as updated from time to time. (d) Units of Mutual Fund Schemes which are listed or where repurchase/redemption facility is available for such units through the Asset Management Company, with underlying investments in equity, equity related instruments or debt instruments. (e) Units of Exchange Traded Funds (excluding gold, silver and any other commodity ETFs) (f) Units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs); (xxiia) “Loan to Value (LTV)” shall mean the ratio of the outstanding loan amount to the value of the securities as on any given day. (xxiib) “Margin” shall mean the contribution of the borrower, either in the form of cash or other liquid assets, for the purpose of purchasing or borrowing a security with bank finance or obtaining a non-fund-based facility from bank. (xxiic) “Non-financial company” shall mean an entity not primarily engaged in undertaking financial activities, and in the context of domestic entities, shall refer to a non-banking institution which is a company but not included in the definition of a ‘financial institution’ or a ‘non-banking financial company’ as per the RBI Act, 1934, (xxxa) “Primary Security” shall mean security created on assets which have been financed out of the credit facility extended to the borrower. (2) In ‘Chapter II - Role of The Board’ of the Directions, the following modifications shall be effected: (i) Sub-paragraph 5(11) shall be substituted with the following: “Loan Against Financial Assets including eligible securities.” (ii) Sub-paragraph 5(12) shall be deleted. (iii) After sub-paragraph 13, the following sub-paragraph shall be inserted: “(14) Credit Facilities to Capital Market Intermediaries (CMIs)” (3) In ‘Chapter XI - Loans Against Financial Assets’ of the Directions, the following amendments shall be effected: (i) All Sections and Paragraphs – except Section M and Section O, and Paragraphs 197, 198 and 200 - shall be deleted. (ii) A new Section ‘Q. Loans Against Eligible Securities’ shall be inserted after paragraph 201 as given below: Q. Loans against Eligible Securities Q.1 General Conditions 201A. Banks may extend credit facilities against the collateral of eligible securities, as permitted in this chapter as per their approved policy (hereinafter called the policy). The policy shall, at the minimum, specify the criteria for selecting securities as collateral; determining portfolio-level as well as single borrower/group borrower limits; concentration limits for exposure to single securities; LTV/margins and haircuts for different securities; and rules for ongoing valuation and margin calls. 201B. Notwithstanding the above, following loans by a bank shall not be permitted: (1) Loans against its own securities; Provided that, a bank may extend loans to individuals against Long-Term Bonds issued by it for infrastructure financing under the provisions of the Reserve Bank of India Small Finance Banks – Resource Raising Norms) Directions, 2025 . The Board of the bank shall frame a policy in this regard, prescribing suitable margins, purpose of the loan, and other necessary safeguards. Such loans shall be subject to a ceiling, say, ₹10 lakh per borrower; and tenure of the loan shall not exceed the maturity period of the underlying bonds. It is also clarified that a bank shall not extend loans against such bonds issued by other banks. Provided further that, a bank may lend against CDs and buy back their own CDs where such CDs are held by mutual funds, subject to the provisions of paragraph 42(1) of the SEBI (Mutual Funds) Regulations, 2026. Further, such finance if extended to equity-oriented mutual funds shall form part of banks’ capital market exposure, as hitherto. (2) loans against partly paid shares; (3) loans against securities which are under any lock-in requirements; (4) loans against collateral of Indian Depository Receipts (IDRs); (5) loans against securities of such entities to which banks are not allowed to grant loans and advances; (6) loans to companies for buy-back of shares/ securities as specified in paragraph 23 of Reserve Bank of India (Small Finance Banks – Credit Risk Management) Directions, 2025 . (7) loans against Commercial Papers and Non-Convertible Debentures of original or initial maturity upto one year; 201C. While undertaking lending activities under the provisions of this chapter, a bank shall: (1) put in place robust mechanisms to monitor end use of the funds. (2) stipulate suitable risk limits taking into account inter alia the liquidity, volatility, and potential stress period corrections in the price of securities. (3) ensure that the residual maturity of the securities initially taken as collateral, or subsequently substituted for the original collateral securities, is equal to or longer than the tenor of the loan. Explanation: Condition of residual maturity is applicable in cases of non-perpetual securities. (4) ensure that provision of Section 19(2) of Banking Regulation Act, 1949 on holding of shares are adhered to. (5) ensure that the prudential limits prescribed under these Directions are adhered to even when loans are extended to any of the joint holders of securities by treating the joint holders as availing proportionate amount of loan sanctioned to them jointly. (6) undertake the creation and invocation of pledge/hypothecation/lien against Government securities in terms of Section 28 of the Government Securities Act, 2006, Chapter VII of Government Securities Regulations, 2007; any other specific requirements as issued by the Government for such securities; and relevant guidelines issued by the Reserve Bank from time to time. (7) ensure that loans taken against Sovereign Gold Bond (SGB) are in terms of the instructions specified in SGB notification issued by Government of India and the operational instructions relating to creation and invocation of pledge/hypothecation/lien as per paragraph 11 of circular on ‘Sovereign Gold Bond Scheme of the Government of India (GoI) - Procedural Guidelines – Consolidated’ dated October 22, 2021 , as amended from time to time. 201D. All exposures arising out of loans against eligible securities under this Chapter shall be included as CME, as specified in Reserve Bank of India (Small Finance Banks Concentration Risk Management) Directions, 2025 , except wherever specifically exempted. Q.2 Lending to Individuals Q.2.1 Scope 201E. Loans to individuals, including Hindu Undivided Families (HUFs) which are not commercial entities, shall be covered under this section. 201F. Banks may lend to individuals against eligible securities, subject to the LTVs and prudential ceilings specified hereunder. Q.2.2 LTV Requirements 201G. Banks shall lay down the LTV for loans against eligible securities to individuals as per their credit policy, subject to the following ceilings: Eligible Securities

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2025-26/259 · issued 30 Mar 2026. The plain-English explanation above is BankPulse’s own independent summary.