Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025 (Updated as on July 01, 2026)

1. Credit risk spreads

Credit risk left unmanaged can spread into other kinds of risk.

1. Ten per cent relates entity

An entity where such a person holds more than ten per cent of the equity is also related.

2. Twenty per cent of votes

Control of more than twenty per cent of the voting rights also makes an entity related.

3. Five per cent makes relation

A person owning or voting more than five per cent of the institution counts as a related person.

4. Credit risk for institutions

This document sets the credit risk management rules for all India financial institutions.

5. Start date

These Directions took effect on the day RBI issued them.

BankPulse example. There is no gap here between issue and effect. The Directions come into effect immediately upon issuance. A bank cannot wait for a separate start date, because there is none.

6. Who is covered

These Directions apply to all India financial institutions.

7. What a bank guarantee is

A bank guarantee covers both financial and performance guarantees given for a client.

8. Committee may be existing

An existing committee other than the audit committee may be used for this work.

9. What control means

Control here carries the meaning given in the Companies Act, 2013.

10. What an entity means

An entity here means a person other than an individual or a Hindu Undivided Family.

11. Lending includes both kinds

Lending to a related party covers funded and non-funded facilities alike.

12. Nominee directors excepted

A right to name a director that comes only from a lending arrangement is outside this.

13. Professional advice excepted

Advice or instructions given in a professional capacity are outside this too.

1. Board policy on credit risk

The Board must approve a full policy on managing credit risk.

2. Policy covers four areas

That policy must cover related party lending, the entity code, charge filing and revolving facilities.

1. Materiality ceilings by size

The materiality ceiling is 25 crore rupees for the biggest institutions, 10 crore mid-sized, and 5 crore for the rest.

BankPulse example. The ceiling depends on size. It is ₹25 crore for the biggest institutions, ₹10 crore for mid-sized ones, and ₹5 crore for the rest. A ₹7 crore item is material for the smallest band and not for the others.

2. No loan on own shares

A lender cannot lend against the security of its own shares.

3. Staff rate is the floor

Such a loan cannot carry a rate lower than the rate charged to employees.

4. Board owns related party rules

The Board carries overall responsibility for the related party lending policy.

5. Extra safeguards required

The policy must set extra safeguards against the risks of related party lending.

6. Staff and their relatives

The policy must cover lending to specified employees and their relatives.

7. Cap on related party loans

The policy must set a total limit for loans to related parties.

8. Sub-limits within the cap

Inside that total there must be sub-limits for one party and for a group.

9. Inside RBI limits

Those limits must sit inside the exposure limits RBI already sets.

10. Judged transaction by transaction

The materiality threshold applies to each loan on its own.

11. Thresholds may differ

The threshold may differ for different kinds of related party loan.

12. Board or its committee

A loan above the threshold must be sanctioned by the Board or its related party committee.

13. Smaller loans delegated

A loan below the threshold may be sanctioned under delegated powers.

14. Step out of the room

Anyone connected to the borrower must take no part in the decision.

15. Yearly report to the Board

Loans to specified employees and their relatives are reported to the Board each year.

16. Deviations to audit

Any departure from the policy must be reported to the audit committee with reasons.

17. Breach draws action

Breaking or dodging these rules brings supervisory and enforcement action.

18. Secured director loans allowed

A loan to a director against government securities, insurance policies or deposits is allowed within their full realisable value.

1. Both kinds of exposure

Exposure here covers funded and non-funded, credit and investment alike.

2. Higher of limit or balance

The higher of the sanctioned limit and the outstanding balance is taken.

3. Push the group to enrol

Large borrowers must be encouraged to get codes for parent and group companies.

4. Codes must be renewed

The lender must see that borrowers renew those codes when due.

1. Registry open to all

The central registry records must be open to search by any lender or person.

2. Every charge must be filed

Every transaction creating a security interest must be filed with the registry.

3. File as you go

Charges on current transactions must be filed with the registry as they arise.

1. No working capital finance

An institution cannot give working capital finance unless RBI allows it specifically.

2. No revolving underwriting

It cannot offer a revolving underwriting facility for short term notes or debentures.

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.