What changed
RBI consolidated and updated its concentration risk management framework into a single Direction, replacing earlier piecemeal guidelines. The new Directions incorporate Basel Committee's large exposures framework and introduce updated definitions, including 'eligible capital base' based on Tier 1 capital. The rules apply to all commercial banks except Small Finance Banks, Payment Banks, and Local Area Banks.
What it means for you
Banks must now manage concentration risk across both asset and liability sides under a unified regulatory framework. The updated eligible capital base definition allows inclusion of post-balance sheet Tier 1 capital infusions with auditor certification. This enhances risk sensitivity and aligns Indian banks with global best practices, potentially impacting lending limits and risk management processes.
What you must do
- Review and update internal policies to align with the new consolidated Directions on concentration risk management.
- Ensure compliance with the updated definition of eligible capital base, including procedures for auditor certification of capital infusions.
- Assess current large exposures, intra-group transactions, and inter-bank liabilities against the new prudential limits.
- Train risk management and compliance teams on the revised framework and reporting requirements.
Who it affects
All commercial banks (excluding Small Finance Banks, Payment Banks, and Local Area Banks), Risk management departments, Compliance and audit teams, Board of Directors
When do these Directions take effect?
The Directions came into effect immediately upon issuance on November 28, 2025. The document was updated as on April 1, 2026, but the effective date remains November 28, 2025.