Reserve Bank of India (All India Financial Institutions – Responsible Business Conduct) Directions, 2025 (Updated as on July 1, 2026)

1. Conduct rules for institutions

This document sets the lending conduct rules for all India financial institutions.

2. Start date

These Directions took effect on the day RBI issued them.

3. Who is covered

These Directions apply to the all India financial institutions named in them.

1. Board approves the policies

The Board must approve the policies and reviews that keep customer service sound.

2. Board reviews fair practices

Compliance with the fair practices code and the complaints system must be reviewed regularly.

3. Reviews go to the Board

A combined report of those reviews goes to the Board at intervals it sets.

1. Small loans, gentle watch

Supervision after payout of a loan up to 2 lakh rupees must stay constructive.

BankPulse example. A borrower with a ₹1.5 lakh loan falls behind. The loan is up to ₹2 lakh, so the follow-up must stay constructive. The aim is to sort out genuine difficulty, not to press.

2. Reply in twenty-one days

An objection to a loan transfer must be conveyed within 21 days of the request.

BankPulse example. A request reaches the lender on 1 September. Any objection must be conveyed within 21 days, which is by 22 September.

3. Fees stated in the form

All processing charges and fees must be stated in the loan application form.

4. Fees also on the website

The same information must appear on the website for every loan product.

5. Fees must not discriminate

Those charges and fees must be the same for everyone.

6. Receipt states the time frame

Every loan application gets a receipt stating by when it will be decided.

7. Checked in reasonable time

Loan applications must be checked within a reasonable time.

8. Ask for papers at once

If more papers are needed, the borrower must be told immediately.

9. Assess the borrower properly

Every credit application must be properly assessed.

10. Security is not a shortcut

Margin and security cannot stand in place of checking whether the borrower can repay.

11. Terms put in writing

The agreed terms must be put in writing and certified by an authorised officer.

12. Pay out on time

Sanctioned loans must be paid out on time and on the sanctioned terms.

13. Notice before a change

Notice must be given before any change in terms, interest rate or charges.

14. Rate changes look forward

A change in interest rate or charges can only apply from that date onwards.

15. Release security on repayment

All security must be released once the loan is repaid, subject to any other lawful claim.

16. No discrimination in lending

Lending cannot discriminate on grounds of sex, caste or religion.

17. Weaker section schemes allowed

That does not stop a lender joining schemes meant for weaker sections.

18. No harassment in recovery

Recovery must not involve harassment, calls at odd hours or muscle power.

19. Code on the website

The fair practices code must be placed on the website.

20. No interest on penalties

Penal charges cannot be capitalised. No further interest may run on them.

21. Unpaid interest at normal rate

Interest on unpaid interest runs at the contracted rate, not the penal rate.

22. Penalty only on the default

Penal charges must be reasonable and charged only on the amount in default.

23. No penalty on a penalty

A fresh penal charge cannot be added on top of penal charges already due.

24. No extra interest component

No new component may be added to the rate of interest to work around these rules.

25. Board policy on penal charges

The Board must approve a policy on penal charges by whatever name they are called.

26. Same penalty for all

Within a loan product, penal charges must be the same whoever the borrower is.

27. Website link is not enough

Pointing to a schedule on the website does not meet the disclosure duty.

28. Reminders state the penalty

A reminder about a breach must state the penal charge that applies.

29. Switch at next renewal

Existing loans move to the new penal charge rules at the next review or renewal.

30. Charge on the amount repaid

On a term loan, any prepayment charge must be based on the amount being repaid.

31. Charge base on early closure

Closing an overdraft early: the pre-payment charge is worked out on an amount not above the sanctioned limit.

32. Lender's own call is free

No charge applies where the lender itself asks for the loan to be repaid early.

33. Disclosed or not charged

A prepayment charge that was not disclosed as required cannot be charged at all.

34. No reviving waived fees

Fees waived earlier cannot be brought back when the loan is repaid early.

1. Court order to follow

The lender must take steps to comply with the Supreme Court order of 30 April 2025.

1. Old actions preserved

Anything already done under the old rules stays governed by those old rules.

2. Approvals carried over

Approvals given under the cancelled rules are now treated as given under these rules.

3. Other laws still apply

These Directions add to other laws. They do not replace any of them.

BankPulse example. A bank follows these Directions and thinks the matter is closed. It is not. Any other laws, rules, regulations or directions in force still apply on top. Where another one asks for more, the bank does the more.