Reserve Bank of India (Commercial Banks – Concentration Risk Management) Directions, 2025

1. Auditor certifies new capital

An outside auditor must certify fresh capital before it counts in the base.

2. Exposure limits for banks

This document sets the limits on how much exposure a bank may build to one borrower or group.

3. Start date

These Directions came into effect immediately upon issuance.

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.

4. Who is covered

This applies to commercial banks, not Small Finance Banks, Payment Banks or Local Area Banks.

5. Acquisition finance defined

Acquisition finance means what the Credit Facilities Directions say it means.

6. Profit counts as capital

For an Indian bank, profit earned during the year also counts as Tier I capital here.

7. Exempt entities still capped

Exposure to these entities still sits under the limits RBI has set.

8. Foreign branches sit outside

Branches abroad that are part of the parent bank are outside the intra-group limits.

9. Overseas branches outside the norm

A bank's exposure to its own overseas branches is outside the intra-group norms.

10. Non-debt mutual funds

A non-debt mutual fund is one whose corpus is not only in debt securities.

11. Words carry their given meaning

Terms not defined here take their meaning from the Banking Regulation Act.

1. Board sees the reviews

Named reviews and reports must be put up to the Board.

1. Report large exposures

A bank must report its large exposures to RBI on the template in Annex I.

2. Top 20 exposure reporting

Banks must always report their 20 largest exposures to RBI, no matter the size.

3. Single counterparty cap

A single counterparty cannot receive more than 20% of a bank's eligible capital.

4. Board's extra 5 percent

In special cases, a bank's board can allow 5% more exposure to one counterparty.

5. Connected group cap

A group of connected counterparties cannot receive more than 25% of a bank's eligible capital.

6. Breach reporting

Any breach of these exposure limits must be reported to RBI right away and fixed fast.

7. Fifty per cent means control

One firm holding more than 50 percent of another's votes counts as control.

8. Old foreign bank derivatives

A foreign bank may leave out derivative contracts made before April 1, 2019.

9. Interbank exposures capped

Interbank exposure is capped at 25 percent of Tier 1 capital, apart from intra-day.

10. Look through the structure

The bank must look through a structure to find assets worth 0.25 percent or more.

11. Small structures stand alone

Where the total exposure to a structure is under 0.25 percent, the structure is the counterparty.

12. The unknown client

Where the assets cannot be identified and the exposure is larger, it goes to an unknown client.

13. Report exempt exposures too

An exempt exposure must still be reported if it is large enough to count.

14. Policy for the extra room

The Board must lay down a policy where the rules allow it extra room.

15. Check who is connected

The bank must test how counterparties are related before treating them as one group.

16. Board policy on connectedness

The Board must approve a policy for deciding when counterparties are connected.

17. Yearly undertaking on 31 March

The bank must give RBI an undertaking as on March 31 every year that the balance is kept.

18. Group exposures added up

Exposures of every entity in the banking group are added and set against group capital.

19. Limits apply at solo level

The large exposure limits apply at the bank's own level, including branches abroad.

20. Hedged exposure moves across

An exempt exposure hedged by a credit derivative counts against the protection seller.

21. Consortium lending counts

The limits also cover lending under consortium, multiple banking and syndication.

22. Measure as the rules say

Exposures are measured the way the Directions themselves set out.

23. A connected group is one

A group of connected counterparties is treated as a single counterparty.

24. Control and dependence apart

Connection through control and connection through economic dependence are judged apart.

25. Money kept is not capital

Money placed under the Banking Regulation Act is not counted in capital as well.

26. Value at market price

Straight debt and equity exposures are valued at their market price.

27. Convert the derivatives

Swaps, futures, forwards and credit derivatives are turned into positions first.

1. Shareholding cap

A bank cannot hold shares worth more than 30% of a company's paid-up capital.

2. Capital market cap

A bank's total capital market exposure cannot exceed 40% of its eligible capital.

BankPulse example. A bank's whole capital market exposure may not exceed 40 per cent of its eligible capital base. Suppose that base is ₹2,000 crore. The exposure stops at ₹800 crore.

1. Six-month repair window

Banks had six months from December 4, 2025 to fix any intra-group exposure breaches.

1. RBI's reading final

RBI's reading of these Directions is final, and every bank must follow it.

2. Older rules cancelled

This cancels all of RBI's earlier rules on concentration risk management for commercial banks.

3. Old actions preserved

Action already started under the old rules stays governed by those old rules.