Reserve Bank of India (Mortgage Guarantee Companies) Directions, 2025 (Updated as on March 10, 2026)
UR
- Applies toMortgage guarantee companies
- StatusIn force
- ImportanceMUST READ
- IssuedNov 28, 2025
- Last amendedMar 10, 2026 · 1 incorporated
- Length44 points in 2 sections · 4 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
Kept in your browser only. Your desk
Show me the points for
Nothing is removed from the page.
Show me the points about
41 of the 44 points name no product and bind every product. All products.
Numbers to remember
| ₹100 crore | You need a net owned fund of ₹100 crore to start business. RBI Para 11 |
| 90 per cent | At least 90 per cent of your business must be mortgage guarantee business. RBI Para 13(1) |
| 10 per cent | You may run other business up to 10 per cent of your total assets. RBI Para 17 |
| six per cent | Your Tier 1 capital must be at least six per cent of risk weighted assets. RBI Para 25 |
| 15 per cent | You may not lend to one borrower beyond 15 per cent of your Tier 1 capital. RBI Para 41 |
| 25 per cent | You may not lend to one group of borrowers beyond 25 per cent of your Tier 1 capital. RBI Para 41(2) |
| 40 per cent | You must set aside at least 40 per cent of premium earned each year to the Contingency Reserve. RBI Para 44 |
| five per cent | Your Contingency Reserve must reach at least five per cent of outstanding guarantee commitments. RBI Para 47 |
| 100 per cent | You must write off the entire loss asset, or provide 100 per cent for it. RBI Para 54(1) |
| one per cent | You must provide one per cent on guarantee cover for housing loans above ₹20 lakh. RBI Para 54(1) |
| 80 per cent | The maximum loan-to-value ratio for cover on big loans has been cut from 90 to 80 per cent. RBI Para 89 |
| ₹20 lakh | For loans up to ₹20 lakh, the LTV ratio may go up to 90 per cent. RBI Para 89 |
What it says
Chapter I. Preliminary
1. Who these rules cover
These rules cover every Mortgage Guarantee Company registered with RBI.
2. Registered MGCs only
These rules apply once RBI has granted you a certificate of registration.
Chapter II. Role of Board, Registration and Permissible Activities
Must know
1. Board approves key policies
Your Board must approve the policies on capital, investment, guarantees and pay.
2. Registration comes first
You must obtain a certificate of registration from RBI before starting business.
3. Hundred crore to start
You need a net owned fund of ₹100 crore to start business.
4. Ninety per cent core business
At least 90 per cent of your business must be mortgage guarantee business.
5. RBI can cancel registration
RBI can cancel your registration if you break these rules.
6. Ten per cent, other business
You may run other business up to 10 per cent of your total assets.
7. No insurance business
You may not carry out insurance business.
8. No public deposits
You may not accept deposits from the public.
9. No external commercial borrowing
You may not raise External Commercial Borrowings.
Chapter III. Prudential Regulations
Must know
1. Capital adequacy, ten per cent
Your capital adequacy ratio must not fall below 10 per cent of risk weighted assets.
2. Tier 1, six per cent
Your Tier 1 capital must be at least six per cent of risk weighted assets.
3. Tier 2 under Tier 1
Your Tier 2 capital may never be more than your Tier 1 capital.
4. One guarantee, ten per cent
A single guarantee may not exceed 10 per cent of your Tier 1 and Tier 2 capital.
5. Mutual fund income, cash basis
You must book income from mutual fund units only on a cash basis.
6. NPA income, cash basis only
You must recognise income on a non-performing asset only when you actually receive it.
7. Fifteen per cent, one borrower
You may not lend to one borrower beyond 15 per cent of your Tier 1 capital.
8. Twenty-five per cent, one group
You may not lend to one group of borrowers beyond 25 per cent of your Tier 1 capital.
9. Forty per cent to reserve
You must set aside at least 40 per cent of premium earned each year to the Contingency Reserve.
10. Five per cent of commitments
Your Contingency Reserve must reach at least five per cent of outstanding guarantee commitments.
11. Locked in for seven years
You must keep each year's reserve amount locked in for several years before you may reverse it.
12. Loss assets, write off fully
You must write off the entire loss asset, or provide 100 per cent for it.
13. Sub-standard, ten per cent provision
You must set aside a general provision of 10 per cent on every sub-standard asset.
14. Standard cover above twenty lakh
You must provide one per cent on guarantee cover for housing loans above ₹20 lakh.
BankPulse example. For example, a guarantee of ₹30 lakh on a home loan works out to ₹30,000 set aside, at RBI's one per cent rate.
15. No investing in subsidiaries
You may not invest in your own subsidiaries or joint ventures.
16. Twenty-five per cent, government paper
You must hold at least 25 per cent of your investments in government securities.
17. One category, 25 per cent
You may not put more than 25 per cent of the rest in any one investment category.
Background
18. Book dividend income once declared
You may book dividend income only after the company declares it at its AGM.
Chapter IV. Corporate Governance
1. Audit Committee needs a CA
At least one non-executive director on your Audit Committee must be a Chartered Accountant.
Chapter V. Miscellaneous instructions
Must know
1. Pay when demand is made
You must pay your guarantee liability as soon as the lender's demand notice arrives.
2. LTV now eighty per cent
The maximum loan-to-value ratio for cover on big loans has been cut from 90 to 80 per cent.
3. Small loans stay at ninety
For loans up to ₹20 lakh, the LTV ratio may go up to 90 per cent.
4. Verify the mortgage is valid
Before you guarantee a loan, you must confirm it is secured by a valid mortgage.
5. Loan under ninety per cent
The loan you guarantee may not exceed 90 per cent of the property's value.
6. No commissions for referrals
You may not pay commissions or rebates for referring guarantee business to you.
7. No guaranteeing related parties
You may not guarantee mortgages of your own promoters or related parties.
8. No lending against own shares
You may not lend money against your own company's shares.
9. Board frames guarantee policy
Your Board must frame the policy for how you provide mortgage guarantees.
10. Board sets the guarantee fee
Your Board must set the fee you charge for each guarantee.
11. Board approves the guarantee scheme
Your Board must approve a detailed scheme before you offer any guarantee.
Background
12. Recovery cuts your liability
If the lender recovers part of the loan itself, your guarantee liability drops by that amount.
Chapter VIII. Repeal and Other Provisions
1. Old MGC rules are repealed
These Directions repeal every earlier RBI instruction that applied to MGCs.
2. Old rights still protected
Rights and penalties from before this repeal still apply as before.
How this rule has changed
The points above are the rule as it stands today, after every change listed here.
Issued on Nov 28, 2025. This is the date RBI put the rule out.
Changed on Mar 10, 2026.
- Directions start date. These amendment rules apply from the date of this letter.
- Quarterly profit review. Quarterly profit can count in owned fund only if auditors review or audit every quarter.
- Quarterly profit cap. Eligible quarterly profit must be net profit minus one fourth of average dividend of the last three years.
- Losses reduce owned fund. Any current year loss must be fully cut from owned fund.