What changed
RBI issued a comprehensive consolidated direction replacing previous circulars on credit risk management. New chapters were added on maintenance of cash credit, current, and overdraft accounts (Chapter XIA) and loan system for delivery of bank credit (Chapter XII). Definitions for bank guarantees, bills purchased/discounted, and cash credit were formally codified.
What it means for you
Banks must align their credit risk policies and procedures with the updated consolidated framework. The new chapters on cash credit/overdraft accounts and loan system delivery will require operational changes in how these facilities are structured and monitored. Compliance with statutory and regulatory restrictions remains critical.
What you must do
- Review and update board-approved credit risk policies to align with the 2025 Directions.
- Implement revised definitions and procedures for bank guarantees, bills purchased/discounted, and cash credit.
- Ensure compliance with new chapters on cash credit/overdraft accounts and loan system for delivery of bank credit.
- Train credit risk teams on updated statutory and regulatory restrictions.
Who it affects
Commercial banks (excluding Small Finance Banks, Payment Banks, Local Area Banks), Credit risk management teams, Board of directors and senior management, Loan operations and compliance departments
When do these Directions take effect?
The Directions came into effect immediately upon issuance on November 28, 2025.
Which banks are covered under these Directions?
Commercial banks as defined under the Banking Regulation Act, 1949, including banking companies (excluding Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and State Bank of India.
What are the key new chapters added?
Chapter XIA on maintenance of cash credit, current, and overdraft accounts, and Chapter XII on loan system for delivery of bank credit.