Reserve Bank of India (Commercial Banks - Undertaking of Financial Services) Directions, 2025

1. Other business for banks

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 commercial 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.

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. Arm's length with subsidiary

The Board must keep an arm's length relationship with a sponsored subsidiary.

4. Board reviews the subsidiary

The subsidiary's performance must be reviewed by the Board from time to time.

1. Time deposits stay in house

Time deposits are taken by the bank itself, or by a permitted housing finance company.

2. One business, one entity

As a rule a form of business is carried on by one entity in the group.

3. Two entities need a reason

Using more than one group entity for the same business needs a stated reason.

4. New business needs approval

A business not listed in these rules needs the Reserve Bank's prior approval.

5. April 2026 cut off

A bank not in line with these rules cannot take new business in that segment.

6. Report by March 2026

A compliance report on this is due by 31 March 2026.

7. Old facilities run on

Facilities already given continue to be serviced until they mature.

8. 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.

9. Stricter rule abroad

An overseas branch follows whichever rule is stricter, the host's or India's.

10. Subsidiaries only for permitted work

A subsidiary may be set up only for work the Banking Regulation Act permits.

11. More equity needs approval

Putting more equity into a group entity needs prior approval.

12. Thirty days for a plan

Where shares come to a bank by default, a disposal plan is due in thirty days.

13. One reconstruction company

A bank cannot sponsor more than one asset reconstruction company.

14. Group stake under twenty

The group's holding in a reconstruction company must stay below twenty per cent.

15. 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.

16. Ten per cent alone

A lender alone cannot put more than ten per cent into an alternative investment fund.

17. Twenty per cent from all

All regulated lenders together cannot hold more than twenty per cent of a fund.

18. 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.

19. Some funds are exempt

The Reserve Bank may exempt named funds from these rules by notification.

20. Group may go to thirty

With prior approval a bank group may hold up to thirty per cent of such a fund.

21. No Category III funds

A bank cannot invest in the corpus of a Category III alternative investment fund.

22. No hidden way round

Fund investments must not be used to get round rules that bind the bank directly.

23. Read with concentration rules

These rules are read together with the concentration risk Directions.

24. Apply through Pravaah

An application needing the Reserve Bank's approval goes through the Pravaah portal.

25. Subsidiary has no account access

A subsidiary cannot have online access to customers' accounts at the bank.

26. No favours to the subsidiary

A subsidiary gets no better treatment than any other party of the same risk.

1. Factoring limits certified

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. Primary dealer registers

A subsidiary for primary dealership must be registered as a finance company.

4. Fund business through a company

Mutual fund business with risk is done only through a subsidiary or joint venture.

5. Portfolio service via group

Portfolio management is offered only through a group entity with prior approval.

6. Client gets a statement

The account holder is entitled to a statement of his portfolio account.

7. Client money kept apart

The bank's own investments and the client's portfolio must be kept distinct.

8. Deals at market rates

Dealings between the bank's own account and a client portfolio are at market rates.

9. Only permitted products

Agency business is allowed only in products the lender may itself deal in.

10. Fee only, no risk

The service is given for a fee. The lender carries none of the risk.

11. Pay must not push sales

Staff assessment and incentives cannot breach the law on commission.

12. Insurer must handle complaints

The insurer whose products are sold must itself have a working complaints system.

13. Lender helps the customer

The lender must help the customer get a complaint settled.

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.