Reserve Bank of India (Commercial Banks – Credit Risk Management) Directions, 2025 (Updated as on July 01, 2026)

1. Latest update

The document was last updated on July 1, 2026.

2. Date of issue

RBI issued these Directions on November 28, 2025.

3. Credit risk significance

Commercial banks face many risks, and credit risk is one of the most significant among them.

1. 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.

2. In force at once

The rules took effect the day they were issued. There was no grace period.

3. Who is covered

This rule applies to commercial banks, called 'banks' here.

1. Board-approved credit policy

A bank's Board must approve a full policy on credit risk management.

1. Own-share lending ban

A bank cannot grant loans or advances against the security of its own shares.

2. No loans to directors

A bank cannot commit to grant loans or advances to its own directors.

3. Buy-back financing ban

A bank cannot provide loans to companies for buy-back of their shares or securities.

1. Ozone-linked financing ban

A bank cannot finance new units that consume or produce ozone depleting substances.

2. Related-party materiality cap

Loans to related parties must follow a materiality threshold set in the credit policy, capped by RBI ceilings.

3. Board approval threshold

Loans above the materiality threshold must be sanctioned by the Board or a related-party lending committee.

4. Recusal rule

Directors and key staff must recuse themselves from decisions on loans involving themselves or their related parties.

5. Quarterly internal audit

Internal auditors must review related-party loans at least once every quarter.

6. Penalties for breach

Breaking or dodging these rules can bring monetary penalties, forced provisioning, or forensic audits.

1. Unhedged forex exposure

Banks must assess borrowers' unhedged foreign currency exposure and hold extra provisioning and capital against it.

2. 75% EBID trigger

Borrowers whose potential forex loss tops 75% of EBID trigger 80 basis points extra provisioning and a higher risk weight.

1. LEI code requirement

Non-individual borrowers with total exposure of 5 crore rupees or more must obtain a Legal Entity Identifier code.

BankPulse example. A company borrows ₹7 crore across banks. That is ₹5 crore and above, so it must get a Legal Entity Identifier code. A company borrowing ₹3 crore need not.

2. No LEI, no loan

Borrowers who fail to obtain an LEI code cannot get new, renewed or enhanced exposure.

1. Dual valuation rule

A bank must obtain at least two independent valuation reports for properties worth 50 crore rupees or more.

BankPulse example. A property valued at ₹65 crore needs two independent valuation reports. That is because it is ₹50 crore or above. A property valued at ₹30 crore is below ₹50 crore, so this rule does not apply.

2. Valuer independence

Property valuation must be done by independent valuers with no direct or indirect interest.

1. CERSAI filing duty

Banks must keep filing every security interest transaction with the CERSAI registry on an ongoing basis.

1. Small-exposure current accounts

A bank may freely run a current or OD account when banking-system exposure to the customer is under 10 crore rupees.

BankPulse example. A customer's borrowing across the banking system is ₹6 crore. That is less than ₹10 crore, so any bank may run its current account without restriction. At ₹12 crore the restrictions apply.

2. Current accounts of large borrowers

Keeping the account needs a 10 per cent share of the borrower's total or fund-based banking-system exposure.

BankPulse example. A large borrower owes the banking system 500 crore rupees in all. A bank whose share of that exposure is 50 crore rupees, which is 10 per cent, may keep the borrower's current or overdraft account; one whose share is 40 crore rupees may not.

3. Two-day sweep rule

Money reaching a collection account must move on within two working days of receipt.

1. Loan component rule

The loan component must be at least 60 per cent of the sanctioned working capital limit.

BankPulse example. The loan component must be at least 60 per cent of the sanctioned working capital limit. Suppose the limit is ₹100 crore. Then ₹60 crore is a loan and the rest may be cash credit.

1. Older rules repealed

This document repeals all earlier RBI credit risk management instructions for commercial banks.

2. How the repeal was notified

The repeal of the earlier credit risk management instructions was notified by RBI's circular of 28 November 2025.

3. Earlier repeals stand

Guidelines already repealed before these Directions stay repealed.

4. Old rules stay repealed

Rules repealed before this document was issued remain repealed.

5. Old actions preserved

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

6. Approvals carried over

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

7. Other laws still apply

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

8. RBI's reading final

RBI's interpretation of any part of these Directions is final and binding.