Reserve Bank of India (Small Finance Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
UR
- Applies toSmall finance banks
- StatusIn force
- RBI text changedRBI updated this document on October 05, 2026. BankPulse is re-reading it. BankPulse checked 40 points against RBI's new text on 6 October 2026. 38 stand. 2 are marked below and are being re-read.
- IssuedNov 28, 2025
- Last amendedJun 15, 2026 · 3 incorporated
- Length40 points in 5 sections · 4 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNov 28, 2025The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- Last date to actMarch 31, 2026The day by which the work this rule asks for must be finished.
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What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Chapter I. Preliminary
1. Other business for SFBs
This document sets what other business the lender may take on.
2. In force at once
The rules took effect the day they were issued. There was no grace period.
3. Who is covered
These Directions apply to every small finance bank.
4. Only regulated products
An agency agreement may cover only regulated financial products or services.
5. Referral keeps the lender out
In a referral the lender takes no part in the process and its name is not used.
Chapter II. Role of the Board
1. Board owns the policies
The Board must approve the policies and the risk framework for every such business.
2. Complaints system for insurance
Where insurance is sold, the Board must see that a strong complaints system exists.
3. Board sets factoring limits
For factoring the bank does in house, the Board must set underwriting limits on without-recourse deals.
Chapter III. General Guidelines
Do it
1. New business needs approval
A business not listed in these rules needs the Reserve Bank's prior approval.
2. Fifteen days to tell RBI
A holding company must tell the Reserve Bank within fifteen days of its resolution.
BankPulse example. The Board passes the resolution on 1 September. RBI must be told within 15 days, so by 16 September. The clock runs from the resolution, not from the first day of business.
3. Six businesses need a company
Fund, insurance, pension, advisory, portfolio and broking work needs a separate entity.
4. Read with concentration rules
These rules are read together with the concentration risk Directions.
5. Licence terms also apply
A small finance bank is also bound by the conditions in its own licence.
6. Trading book is exempt
Holdings kept for trading do not need prior approval, within the statutory limit.
7. Twenty per cent needs approval
Taking twenty per cent or more of a company needs prior approval.
8. Thirty days for a plan
Where shares come to a bank by default, a disposal plan is due in thirty days.
9. One reconstruction company
A bank cannot sponsor more than one asset reconstruction company.
10. Stake under twenty
The bank's holding in a reconstruction company must stay below twenty per cent.
11. Policy must cover funds
The investment policy must carry provisions on investing in such funds.
BankPulse example. A lender that has never invested in such a fund still needs the words in its investment policy. The policy must carry provisions governing its investments in a scheme of that kind. Writing them only when the first investment is proposed is too late.
12. Twenty per cent from all
All regulated lenders together cannot hold more than twenty per cent of a fund.
13. Subordinated units deducted
A holding in subordinated units of such a fund is deducted from capital in full.
BankPulse example. A lender puts ₹10 crore into such a fund, as subordinated units. The whole ₹10 crore comes off capital funds. It is taken proportionately from Tier-1 and Tier-2 capital.
14. Some funds are exempt
The Reserve Bank may exempt named funds from these rules by notification.
15. No Category III funds
A bank cannot invest in the corpus of a Category III alternative investment fund.
16. No hidden way round
Fund investments must not be used to get round rules that bind the bank directly.
17. Apply through Pravaah
An application needing the Reserve Bank's approval goes through the Pravaah portal.
Chapter IV. Financial Services
Do it
1. Factoring needs certificates
The borrower's bank must take periodic certificates about factored receivables.
2. Factors report the limits
A factor must report the borrower's sanctioned limits to the banks concerned.
3. Dealer work needs authorisation
Primary dealership done in house needs authorisation from the debt management wing.
4. Underwriting stays in house
Underwriting of shares, debentures and bonds is done by the bank itself.
5. Only permitted products
Agency business is allowed only in products the lender may itself deal in.
6. Fee only, no risk
The service is given for a fee. The lender carries none of the risk.
7. Test the customer's need
A standard way of testing whether a product suits the customer must exist.
8. Check before an investment sale
A product with an investment part needs a need assessment before it is sold.
9. Pay must not push sales
Staff assessment and incentives cannot breach the law on commission.
10. Insurer must handle complaints
The insurer whose products are sold must itself have a working complaints system.
11. Lender helps the customer
The lender must help the customer get a complaint settled.
Chapter V. Repeal and Other Provisions
1. Old rules stay repealed
Rules repealed before this document was issued remain repealed.
2. Past acts still stand
Anything done under the old rules is still judged by the old rules.
3. Old approvals carry over
Approvals given under the repealed rules are now read under these rules.
4. Added to other law
These rules sit on top of every other law and rule already in force.
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 Dec 05, 2025.
- Effective date. These amendment rules apply from December 05, 2025.
- Agency business scope. Agency business covers sale of only regulated financial products or services of third parties.
- Referral process limits. Under referral, the bank must not take part in any process for third party products or services.
- Referral branding ban. Under referral, the bank name or brand must not appear in any product or service document.
Changed on Apr 27, 2026.
- New activity added. Small finance banks can now offer the AgriSURE fund for start ups and rural firms.
- Start date. This change applies from the date of this direction.
Changed on Jun 15, 2026.
- start date. These directions will apply from January 01, 2027.
- agency only regulated. Banks can do agency business only for regulated financial products and services allowed under Section 6(1)(a)-(m) and (o).
- display only covered. Banks must display on digital channels only third-party products and services covered under the permitted arrangement.
- follow conduct directions. Banks must follow the Small Finance Banks Responsible Business Conduct Directions, 2025 for agency business.
The same subject for other kinds of institution
The same subject for other kinds of institution.
RBI financial services business rules for all India financial institutions
RBI financial services business rules for regional rural banks
RBI financial services business rules for rural co-operative banks
RBI financial services business rules for urban co-operative banks
Other RBI rules for small finance banks
RBI compliance officer and compliance function rules for small finance banks 2026
RBI credit bureau reporting rules for small finance banks 2025
RBI credit card and debit card rules for small finance banks 2025
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