What changed
RBI consolidated all existing credit-related instructions for LABs into a single comprehensive directive, the Reserve Bank of India (Local Area Banks – Credit Facilities) Directions, 2025. The new directions cover digital lending arrangements, gold and silver collateral lending, microfinance norms, non-fund based facilities, and real estate sector credit. They also introduce definitions for Annual Percentage Rate (APR), bullet repayment loans, and default loss guarantees, among others.
What it means for you
LABs must now align their credit policies and operations with these consolidated directions, which bring uniformity and clarity to areas like digital lending, gold loan LTV ratios, and microfinance household income assessments. Banks need to update board-approved policies, ensure compliance with new definitions (e.g., APR), and adjust reporting for credit information and default loss sharing. Non-compliance could attract regulatory scrutiny.
What you must do
- Review and update board-approved credit policies to align with the new consolidated directions, especially on digital lending, gold loans, and microfinance.
- Train staff on revised definitions (APR, bullet repayment, DLG) and ensure loan products comply with new norms.
- Implement systems for reporting credit information and default loss guarantee arrangements as per Chapter III requirements.
- Assess gold and silver collateral valuation processes and loan-to-value ratio limits as per Chapter IV.
Who it affects
Local Area Banks (LABs), Credit risk and compliance teams at LABs, Digital lending partners and fintechs working with LABs, Gold loan and microfinance customers of LABs
When do these directions take effect?
These Directions shall come into effect immediately upon their issuance on November 28, 2025, as per the circular date, unless otherwise specified in individual provisions.