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Analysis of RBI Circulars for January 2026
RBI Circulars January 2026
Updates for this month.
RBI/2025-2026/194A.P. (DIR Series) Circular No. 20: Export and Import of Goods and Services
Background
The Reserve Bank of India (RBI) continuously reviews regulations to ensure smooth financial operations. Historically, the export and import of goods and services in India have been governed by various regulations and directions issued under the Foreign Exchange Management Act (FEMA), 1999. To simplify these complex procedures, boost trade efficiency, and specifically support small exporters and importers, the RBI undertook a thorough review in consultation with various stakeholders.
Key Decision
The RBI has introduced new and comprehensive Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026. These regulations are a significant step towards promoting 'ease of doing business' for those involved in international trade. A key objective is to empower Authorised Dealers (ADs), which are banks authorized to deal in foreign exchange, to provide quicker and more efficient services to their customers.
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RBI Circulars January 2026
Updates for this month.
RBI/2025-2026/194A.P. (DIR Series) Circular No. 20: Export and Import of Goods and Services
Background
The Reserve Bank of India (RBI) continuously reviews regulations to ensure smooth financial operations. Historically, the export and import of goods and services in India have been governed by various regulations and directions issued under the Foreign Exchange Management Act (FEMA), 1999. To simplify these complex procedures, boost trade efficiency, and specifically support small exporters and importers, the RBI undertook a thorough review in consultation with various stakeholders.
Key Decision
The RBI has introduced new and comprehensive Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026. These regulations are a significant step towards promoting 'ease of doing business' for those involved in international trade. A key objective is to empower Authorised Dealers (ADs), which are banks authorized to deal in foreign exchange, to provide quicker and more efficient services to their customers.
Effective from October 01, 2026, Authorised Dealers must adhere to the following:
- Strictly comply with FEMA, 1999, and all associated rules, regulations, and directions.
- Follow the extant Foreign Trade Policy issued by the Government of India for all export and import transactions, including merchanting trade.
- Submit all references to the Reserve Bank exclusively through the newly introduced PRAVAAH (Platform for Regulatory Application, Validation And Authorization) portal.
- Report any suspicious or doubtful transactions directly to the Directorate of Enforcement (DoE).
This circular also clearly states that the previous Master Direction – Export of Goods and Services and Master Direction – Import of Goods and Services, along with all 93 individual circulars listed in Annex A, will be superseded (cancelled) once these new directions come into force.
Spotlight on PRAVAAH Portal
The PRAVAAH (Platform for Regulatory Application, Validation And Authorization) portal is a secure, centralized web-based platform launched by the RBI on May 28, 2024.
- Purpose: Acts as a single-window mechanism consolidating various application forms (over 100+) to streamline the process of applying for regulatory approvals.
- Mandatory Usage: Starting May 1, 2025, the RBI has mandated that all regulated entities use this portal exclusively for submitting their regulatory applications.
- Benefits: Allows online submission, document upload, real-time tracking of applications, and centralized record-keeping.
Exam Relevance
- New Regulations: The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 replaces 93 older circulars. Exam Insight: Focus on the name of the new consolidated regulation; consolidation is a key trend.
- PRAVAAH (Platform for Regulatory Application, Validation And Authorization) Portal: New mandatory portal for submitting all RBI references. Exam Insight: Questions often ask for the name of new portals ("Which portal is now mandatory for RBI references?").
- Effective Date: October 01, 2026. Exam Insight: Future effective dates are common trick questions; note this is later in the year.
Summary Table
| Feature | Details |
|---|---|
| Circular No. | RBI/2025-26/194 A.P. (DIR Series) Circular No. 20 |
| Date of Issue | January 16, 2026 |
| Subject | Export and Import of Goods and Services |
| Effective From | October 01, 2026 |
| Key Action | Issuance of new Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 |
| Primary Objective | Promote ease of doing business (especially for small exporters/importers), empower Authorised Dealers for quicker service |
| AD Responsibilities | Adhere to FEMA & Foreign Trade Policy; Use PRAVAAH portal for RBI references; Report doubtful transactions to DoE |
| Superseded Documents | Master Directions for Export & Import of Goods/Services, and 93 older circulars (as per Annex) |
Modified Interest Subvention Scheme (MISS) for Agriculture & Allied Activities (FY 2025-26)
Background
The Reserve Bank of India (RBI) circular RBI/2025-26/193 outlines the continuation of the Modified Interest Subvention Scheme (MISS) for short-term agricultural and allied activity loans availed through Kisan Credit Cards (KCC). This scheme is a government initiative aimed at providing affordable credit to farmers, thereby supporting the agricultural sector. The current circular extends the benefits of this scheme for the financial year 2025-26, building upon similar provisions from previous years.
Key Decision
The Government of India has approved the continuation of the MISS for FY 2025-26 with several key stipulations, primarily focusing on making credit more accessible and affordable for farmers:
- Loan Eligibility: Short-term crop loans and short-term loans for allied activities (like animal husbandry, dairy, fisheries, bee-keeping, etc.) up to an overall limit of ₹3 lakh through KCC.
- Concessional Interest Rate: Farmers will receive these loans at an interest rate of 7% per annum.
- Interest Subvention: Lending institutions (Public Sector Banks, Private Sector Banks - rural/semi-urban branches, Small Finance Banks, and computerized PACS ceded with SCBs) will receive an interest subvention of 1.50% per annum from the government on their own resources used for these loans.
- Prompt Repayment Incentive (PRI): An additional 3% per annum interest subvention will be provided to farmers who repay their loans on time (within one year from disbursement/renewal). This means prompt repaying farmers will effectively get the loan at 4% per annum.
- Loan Tenor: Interest subvention is calculated from disbursement/drawal/renewal up to the date of actual repayment or due date, whichever is earlier, subject to a maximum period of one year.
- Allied Activities Sub-limit: For farmers involved only in allied activities, there's a maximum sub-limit of ₹2 lakh within the overall ₹3 lakh limit. The crop loan component takes priority for benefits.
- Post-Harvest Storage Benefit: Small and marginal farmers can avail the interest subvention benefit for an additional six months post-harvest against Negotiable Warehouse Receipts (NWRs) for produce stored in WDRA-accredited warehouses, at the same crop loan rate.
- Natural Calamities Relief:
- Normal Calamities: Interest subvention for the first year on restructured loan amounts. Normal interest rates apply from the second year.
- Severe Natural Calamities: Interest subvention for the first three years/entire period (maximum five years) on restructured loan amounts, along with the prompt repayment incentive (3% PRI). This requires approval from a High-Level Committee (HLC).
- Mandatory Aadhaar Authentication: Aadhaar seeding and e-KYC are compulsory for farmers to avail scheme benefits.
- Validation of Multiple Accounts: A farmer can receive benefits for a maximum of ₹3 lakh across all KCC accounts. However, for a specific land parcel, only one KCC account (the one with the highest sanctioned amount) will be eligible for benefits.
- Digital Transactions & Data Reporting: Banks are advised to encourage digital transactions and ensure accurate, granular data reporting of beneficiaries and crops sown on the Kisan Rin Portal (KRP) for timely claim submission.
Exam Relevance
- Interest Rate: Farmers get loans at 7% p.a.; Prompt repayment effective rate is 4% p.a. Exam Insight: These are classic, recurring static banking questions that appear every year.
- Subvention Rate: Banks get 1.50% p.a. interest subvention. Exam Insight: Differentiate clearly between what the farmer pays and what the bank receives as support.
- Loan Limit: Overall limit is ₹3 Lakh. Allied activities sub-limit is ₹2 Lakh. Exam Insight: Confusing the overall limit with the sub-limit is a common trap in options.
- Natural Calamities: Severe calamities get interest subvention for up to 5 years. Exam Insight: Know the difference in benefits for normal (1 year) vs. severe calamities (up to 5 years).
Summary Table
| Feature | Details (FY 2025-26) |
|---|---|
| Scheme Name | Modified Interest Subvention Scheme (MISS) |
| Beneficiaries | Farmers availing short-term KCC loans for agriculture & allied activities |
| Overall Loan Limit | ₹3 lakh |
| Lending Rate to Farmers | 7% p.a. |
| Interest Subvention to Banks | 1.50% p.a. |
| Prompt Repayment Incentive | Additional 3% p.a. |
| Effective Rate (Prompt Payers) | 4% p.a. |
| Allied Activities Sub-limit | Max ₹2 lakh for only allied activities (within ₹3 lakh overall) |
| Post-Harvest Storage Benefit | Up to 6 months post-harvest (small/marginal farmers, WDRA warehouses, NWRs) |
| Natural Calamities (Normal) | IS for 1st year on restructured loans, normal rate from 2nd year |
| Natural Calamities (Severe) | IS for 1st 3 years/entire period (max 5 years) + PRI on restructured loans (HLC approval) |
| Mandatory Condition | Aadhaar seeding and e-KYC for scheme benefits |
| Applicable Institutions | PSBs, Private Sector Banks (rural/semi-urban), SFBs, Computerized PACS ceded with SCBs |
RBI/2025-2026/192 A.P. (DIR Series) Circular No. 19: Foreign Exchange Management (Guarantees) Regulations, 2026
Background
Guarantees are crucial tools in international trade and finance, where a bank assures payment on behalf of its customer. The Reserve Bank of India (RBI) regulates these activities, especially when one of the parties is located outside India, to ensure smooth foreign exchange management and prevent misuse. Historically, guidelines for such guarantees were spread across various circulars and master directions, making them complex to navigate. This new circular aims to consolidate and update these regulations.
Key Decision
The RBI has introduced a comprehensive set of Foreign Exchange Management (Guarantees) Regulations, 2026. This is a significant update designed to streamline and clarify the rules for Authorised Dealer (AD) Category I Banks. Key aspects of this circular include:
- New Regulations: AD Banks must now be guided by the new, unified Foreign Exchange Management (Guarantees) Regulations, 2026, for any guarantee involving a person resident outside India.
- Comprehensive Reporting: A new mandatory reporting mechanism has been introduced. AD Banks will now have to report all guarantees (issued, modified, or invoked) using a new Form GRN, which is annexed to the regulations. The exact format for banks to compile and submit these returns will be communicated later.
- Supersession of Old Circulars: Numerous previous A.P. (DIR Series) Circulars (as listed in the Annex of the circular) have been superseded by these new regulations. This simplifies the regulatory landscape by replacing outdated or fragmented instructions.
- Discontinuation of Specific Reporting: The quarterly reporting requirement for the issuance of guarantees for Trade Credit is being discontinued from the quarter ending March 2026.
- Master Direction Amendments: Guarantee-related provisions in several existing Master Directions (like those for External Commercial Borrowings, Trade Credits, Export/Import of Goods and Services, Other Remittance Facilities, and Reporting under FEMA) are being amended to align with these new comprehensive regulations.
Exam Relevance
- Form GRN: New mandatory form for reporting all guarantees. Exam Insight: Questions will ask "Which new form replaces previous reporting for guarantees?".
- Discontinuation: Quarterly reporting for Trade Credit guarantees is discontinued from March 2026. Exam Insight: Knowing what has been removed (deregulation) is just as important as what has been added.
- FEMA Sections: Issued under Sections 10(4), 11(1), and 11(2) of FEMA 1999. Exam Insight: Section numbers are frequently asked in Phase 2 or Grade B exams.
Summary Table
| Aspect | Before (Old System) | After (New System - Effective Jan 12, 2026) |
|---|---|---|
| Governing Regulations | Multiple fragmented A.P. (DIR Series) Circulars | Consolidated under Foreign Exchange Management (Guarantees) Regulations, 2026 |
| Reporting of Guarantees | Specific reporting for certain guarantee types (e.g., quarterly for Trade Credit) | Comprehensive reporting for all issued, modified, or invoked guarantees using Form GRN |
| Quarterly Trade Credit Guarantee Reporting | Required | Discontinued from quarter ending March 2026 |
| Role of AD Banks | Guided by various circulars | Must follow the new comprehensive regulations & DoR guidelines for guarantees involving non-residents |
| Related Master Directions | Existing provisions in various MDs | Amended to align with new Guarantees Regulations |
RBI/2025-2026/191DOR.STR.REC.392/21-01-002/2025-26 - Reserve Bank of India (All India Financial Institutions (AIFIs) - Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background
This RBI circular is an amendment to the existing "Reserve Bank of India (All India Financial Institutions (AIFIs) - Prudential Norms on Capital Adequacy) Directions, 2025." The Reserve Bank of India (RBI) regularly reviews and updates its guidelines to ensure the stability and robustness of the financial system. This particular amendment focuses on how All India Financial Institutions (AIFIs) calculate their capital adequacy, specifically regarding their exposures to non-resident corporates.
Key Decision
The amendment brings two significant changes to the Prudential Norms on Capital Adequacy for AIFIs:
-
Revised Risk Weighting for Non-Resident Corporate Claims (Para 44):
- The circular introduces M/s CareEdge Global IFSC Limited as an officially recognized international credit rating agency. Its ratings will now be used for determining risk weights for claims on non-resident corporates that originate specifically at the International Financial Services Centre (IFSC).
- A new risk-weight mapping table (Table 9.2) is provided for CareEdge Global IFSC Limited ratings for these IFSC-originated claims.
- The existing risk-weight mapping for other international rating agencies like S&P, Fitch, and Moody’s (Table 9.1) remains in place for other non-resident corporate claims.
- Crucially, the circular clarifies risk weights for unrated claims:
- Unrated claims with an aggregate banking system exposure exceeding ₹200 crore will attract a 150% risk weight.
- Claims that were previously rated but have become unrated, with an aggregate banking system exposure exceeding ₹100 crore, will also attract a 150% risk weight.
- No claim on an unrated corporate can be assigned a risk weight more preferential than that of its sovereign of incorporation.
-
Updated List of Approved International Credit Rating Agencies (Para 125):
- The list of international credit rating agencies that AIFIs can use for risk-weighting their claims for capital adequacy purposes has been updated.
- CareEdge Global IFSC Limited has been added to this list, specifically for all non-resident corporate exposures originating at the International Financial Services Centre (IFSC).
- Fitch, Moody's, and Standard & Poor’s remain on the list.
These amendments come into force with immediate effect.
Exam Relevance
- New Rating Agency: CareEdge Global IFSC Limited is now approved for IFSC-originated claims. Exam Insight: Remember this name as the only new addition for this specific purpose.
- Unrated Claims Threshold: Unrated claims > ₹200 Crore get 150% risk weight. Exam Insight: High risk weight thresholds are a favourite topic for objective questions.
- Previously Rated Claims: If they become unrated and > ₹100 Crore, they also get 150% risk weight. Exam Insight: Note the lower threshold (100 Cr) for previously rated claims vs fresh unrated ones (200 Cr).
- Sovereign Cap: Risk weight cannot be better than the sovereign of incorporation. Exam Insight: A conceptual point often asked in statement-based questions.
Summary Table
| Aspect | Previous Status (General) | Amended Status (Key Changes) |
|---|---|---|
| Scope | Prudential Norms on Capital Adequacy for AIFIs | Amendment to existing norms (Directions, 2025) |
| Risk Weighting for Non-Resident Corporates | Based on ratings from S&P/Fitch/Moody’s. | - CareEdge Global IFSC Limited recognized for claims originating at IFSC. - New specific risk-weight mapping for CareEdge Global IFSC Limited introduced (Para 44, Table 9.2). - Existing S&P/Fitch/Moody’s mapping retained for other claims. |
| Approved Credit Rating Agencies | S&P, Fitch, Moody's | - CareEdge Global IFSC Limited added (for IFSC-originated non-resident corporate exposures). - S&P, Fitch, Moody's remain. |
| Unrated Claims | General provisions for unrated claims | - Claims with aggregate banking exposure > ₹200 Cr: 150% risk weight. - Previously rated, now unrated claims with aggregate banking exposure > ₹100 Cr: 150% risk weight. - No unrated corporate claim to be preferential to its sovereign of incorporation. |
| Effective Date | N/A | Immediate effect (January 09, 2026) |
Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Circular Reference: RBI/2025-26/190 DOR.STR.REC.391/21-01-002/2025-26 Date: January 09, 2026
Background
This important RBI circular revises the rules for how Small Finance Banks (SFBs) manage their capital, specifically related to the risk of certain loans they provide. These rules are known as "Prudential Norms on Capital Adequacy." Simply put, SFBs need to hold enough capital to cover potential losses from the loans they give out. This amendment builds upon the previous "Directions, 2025" and focuses on refining how SFBs assess the risk of loans (or 'claims') made to foreign companies, especially those connected to International Financial Services Centres (IFSCs).
Key Decision
The Reserve Bank of India has introduced several key changes to ensure better risk management and capital provisioning by SFBs:
- New Rating Agency Recognition: The circular formally recognizes M/s CareEdge Global IFSC Limited as an international credit rating agency. This agency's ratings can now be used by SFBs specifically for risk-weighting claims on non-resident corporates that originate from an International Financial Services Centre (IFSC).
- Revised Risk Weight Mapping: A new set of risk weights (Table 8.2) has been introduced specifically for claims rated by CareEdge Global IFSC Limited, differing from those used for ratings by other major agencies like S&P, Fitch, and Moody's (Table 8.1). This means SFBs must use the appropriate table depending on which agency rated the claim.
- Stricter Norms for Unrated Claims:
- If a non-resident corporate claim is unrated and the total exposure from the banking system is more than ₹200 crore, it will attract a high risk weight of 150 per cent.
- If a claim was previously rated but has now become unrated, and the total exposure from the banking system is more than ₹100 crore, it also attracts a risk weight of 150 per cent.
- Crucially, no claim on an unrated corporate can be assigned a risk weight lower than that of the government of the country where the corporate is based.
- Updated List of Approved Agencies: The list of international credit rating agencies that SFBs can use for capital adequacy purposes has been updated to officially include CareEdge Global IFSC Limited (specifically for IFSC-originating exposures), alongside Fitch, Moody's, and Standard & Poor’s.
These amendments are effective immediately.
Exam Relevance
- Target Entity: Applies specifically to Small Finance Banks (SFBs). Exam Insight: Differentiate this from the general commercial bank circular.
- Risk Weight Table: New Table 8.2 introduced. Exam Insight: Questions might ask "Which table in SFB norms covers CareEdge ratings?".
- Unrated Exposure: Same 150% risk weight logic applies (200 Cr / 100 Cr thresholds). Exam Insight: Identical to the AIFI and Commercial Bank norms—helps in memorizing one rule for all.
- CareEdge Global IFSC: Recognized for SFBs too. Exam Insight: Shows the standardization of this new agency across liabilities.
Summary Table: Key Amendments (for SFBs)
| Feature | Old (Implicitly/Previously) | New (via this Circular: Jan 09, 2026) |
|---|---|---|
| Scope | General Prudential Norms on Capital Adequacy. | Amendment specifically for Small Finance Banks (SFBs). |
| Claims on Non-resident Corporates (Risk Weights) | Primarily based on ratings by S&P/Fitch/Moody’s (Table 8.1). | Introduces CareEdge Global IFSC Limited as a recognized rating agency for claims originating at International Financial Services Centres (IFSCs). New Table 8.2 for CareEdge Global IFSC Limited ratings with specific risk weights. Table 8.1 still applies for S&P/Fitch/Moody’s. |
| List of Approved Credit Rating Agencies | S&P, Fitch, Moody's (main international). | Adds CareEdge Global IFSC Limited (specifically for IFSC claims), alongside Fitch, Moody's, and Standard & Poor’s. |
| Unrated Claims (Risk Weight) | General norms applied. | Stricter Norms: - Unrated claims (aggregate exposure > ₹200 cr) = 150% risk weight. - Claims previously rated but now unrated (aggregate exposure > ₹100 cr) = 150% risk weight. - No unrated claim can have risk weight preferential to its sovereign of incorporation. |
| Effective Date | Various, based on original directions. | Immediate Effect. |
Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background
Banks are required to maintain adequate capital to cover the risks associated with their lending and other financial activities. These are known as 'Prudential Norms on Capital Adequacy'. This circular is an amendment to the existing Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025. It specifically clarifies and updates how commercial banks should assess the risk of lending to non-resident corporates (international companies), especially those operating within India's International Financial Services Centres (IFSC).
Key Decision
The Reserve Bank of India (RBI) has made two significant changes:
-
Revised Risk Weight Mapping (Para 49): The circular introduces M/s CareEdge Global IFSC Limited as an additional international credit rating agency whose ratings can be used by banks for assigning risk weights to claims on non-resident corporates originating specifically at an International Financial Services Centre (IFSC). This provides a new, tailored risk assessment framework for IFSC-related exposures.
- Unrated Claims Clarification:
- Unrated claims with an aggregate exposure from the banking system exceeding ₹200 crore will now attract a higher risk weight of 150 per cent.
- Claims that were previously rated but have since become unrated, with an aggregate exposure from the banking system exceeding ₹100 crore, will also attract a risk weight of 150 per cent.
- No unrated corporate claim can be assigned a risk weight lower than that of its sovereign of incorporation.
- Unrated Claims Clarification:
-
Expanded List of Rating Agencies (Para 132): The RBI has updated the list of approved international credit rating agencies that banks can use for capital adequacy purposes. CareEdge Global IFSC Limited has been added to this list, specifically for non-resident corporate exposures originating at IFSC. The other approved agencies remain Fitch, Moody's, and Standard & Poor’s.
Exam Relevance
- Universal Applicability: Applies to all Commercial Banks. Exam Insight: This is the parent regulation that usually sets the trend.
- CRAR Calculation: Directly impacts Capital to Risk-Weighted Assets Ratio. Exam Insight: Understand the denominator effect—higher risk weights = lower capital adequacy.
- IFSC Link: Specific to non-resident corporate claims from IFSC. Exam Insight: The specific nature (IFSC origin) is the constraint to remember.
- Risk Weight Thresholds: Unrated claims > ₹200 Crore = 150%. Exam Insight: Memorize this specific number as it's a new, stricter norm.
Summary Table
| Aspect | Old Position (Prior to this amendment) | New Position (Effective January 09, 2026) |
|---|---|---|
| Rating Agencies for Non-Resident Corporates | S&P/Fitch/Moody’s were primarily used for international claims. | Expanded: In addition to S&P/Fitch/Moody’s, M/s CareEdge Global IFSC Limited ratings can now be used for non-resident corporate claims originating at IFSC. |
| Risk Weight Mapping for IFSC Claims | Not explicitly detailed for an IFSC-specific agency. | New Table 10.2 Introduced: Specific risk weights for CareEdge Global IFSC Limited ratings: |
- AAA: 20%
- AA: 30%
- A: 50%
- BBB: 100%
- BB & below: 150% | | Unrated Claims Explanation | General norms for unrated claims applied. | Clarified/Enhanced:
- Unrated claims with aggregate exposure > ₹200 crore: 150% risk weight.
- Previously rated claims (now unrated) with aggregate exposure > ₹100 crore: 150% risk weight.
- No unrated corporate claim can get a risk weight preferential to its sovereign of incorporation. |
Reserve Bank of India (All India Financial Institutions – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
This RBI circular, dated January 05, 2026, introduces amendments to the existing "Reserve Bank of India (All India Financial Institutions – Financial Statements: Presentation and Disclosures) Directions, 2025." The amendments are a direct consequence of the "Reserve Bank of India (All India Financial Institutions – Credit Risk Management) – Amendment Directions, 2026." The primary objective is to enhance transparency and improve financial reporting standards for All India Financial Institutions (AIFIs) by mandating specific disclosures related to 'Related Party Exposures'. The RBI issues these directions under the powers conferred by Section 45L of the Reserve Bank of India Act, 1934, in the public interest.
Key Decision
The circular mandates a new disclosure requirement for All India Financial Institutions (AIFIs) regarding their 'Exposures to Related Parties'.
- New Disclosure Insertion: A new sub-sub paragraph (vi) will be inserted under sub-paragraph 19(9) on ‘Credit concentration risk’ within Chapter-IV ‘Disclosure in Financial Statements – Notes to Accounts’.
- Details Required: AIFIs must disclose comprehensive details about their exposures to related parties. This includes:
- Aggregate value of loans sanctioned to related parties during the year.
- Aggregate value of outstanding loans to related parties as on March 31.
- Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on March 31.
- Aggregate value of outstanding loans to related parties categorized as Special Mention Accounts (SMAs) and Non-Performing Assets (NPAs) as on March 31.
- Amount of provisions held in respect of loans to related parties as on March 31.
- Aggregate value of contracts and arrangements awarded to related parties during the year.
- Aggregate value of outstanding contracts and arrangements involving related parties as on March 31.
- Definition of Related Parties: The definition of 'related parties' will be as specified in the "Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025."
- Effective Date: These amendments will come into force from April 1, 2026. However, AIFIs have the discretion to implement these changes entirely from an earlier date if they choose.
Exam Relevance
For banking exams, this circular is significant for topics related to:
- New Disclosure: Mandatory reporting of Exposures to Related Parties in "Notes to Accounts". Exam Insight: Specific location in financial statements (Notes to Accounts) is a potential question.
- Specific Items: Must disclose sanctioned/outstanding loans, NPAs/SMAs, and provisions for related parties. Exam Insight: Focus on the granularity of data required—it's not just "total amount" but broken down by status (NPA/SMA).
- Effective Date: April 1, 2026. Exam Insight: Standard financial year start date, but note the explicit option for earlier adoption.
- Legal Basis: Section 45L of RBI Act, 1934. Exam Insight: Section 45L gives RBI power to issue directions to financial institutions.
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Reserve Bank of India (All India Financial Institutions – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026 |
| Issued By | Reserve Bank of India (RBI) |
| Date Issued | January 05, 2026 |
| Applies To | All India Financial Institutions (AIFIs) |
| Key Amendment | Insertion of new disclosure requirements for 'Exposures to Related Parties' in financial statements (Notes to Accounts, under Credit concentration risk). |
| Details to Disclose | Loans to related parties (sanctioned, outstanding, proportion to total credit, SMA/NPA classification, provisions) and Contracts/Arrangements involving related parties. |
| Legal Basis | Section 45L of the Reserve Bank of India Act, 1934. |
| Effective Date | April 1, 2026 (AIFIs may implement earlier). |
RBI/2025-26/187: Amendment to NBFC Financial Statements Directions (Related Party Disclosures)
Background
This circular, issued on January 05, 2026, by the Reserve Bank of India (RBI), introduces amendments to the existing Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Directions, 2025. The need for these amendments arose consequent to the issuance of new directions related to "Non-Banking Financial Companies – Credit Risk Management" in 2026. The RBI is exercising its powers conferred by Sections 45JA, 45L, and 45M of the Reserve Bank of India Act, 1934, along with other relevant acts, to enhance transparency and disclosures for NBFCs.
Key Decision
The core change introduced by these Amendment Directions is the insertion of a new sub-paragraph, 21(9A), within Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’ of the original Directions. This new sub-paragraph mandates Non-Banking Financial Companies (NBFCs) to provide detailed disclosures on 'Exposures to Related Parties'.
The disclosures are required to be made as per the definition of related parties provided in the Reserve Bank of India (Non-Banking Financial Companies – Credit Risk Management) Directions, 2025. The specifics of the disclosures are categorised as follows:
- Loans to Related Parties:
- Aggregate value of loans sanctioned during the year.
- Aggregate value of outstanding loans as on 31st March.
- Aggregate value of outstanding loans as a proportion of total credit exposure.
- Classification of outstanding loans as Special Mention Accounts (SMAs) and Non-Performing Assets (NPAs).
- Amount of provisions held against these loans.
- Contracts and Arrangements involving Related Parties:
- Aggregate value of contracts and arrangements awarded during the year.
- Aggregate value of outstanding contracts and arrangements as on 31st March.
These amendments shall come into force from April 1, 2026. However, NBFCs have the option to implement them at an earlier date if they choose.
Exam Relevance
For banking exam aspirants, this circular is significant because:
- Transparency: Focus on Related Party Disclosures to align with Credit Risk Management directions. Exam Insight: The link between "Financial Statements" and "Credit Risk Management" directions is key.
- Format: Specific table provided for disclosure (Loans vs Contracts). Exam Insight: Questions may mention "Sub-paragraph 21(9A)" which is the new insertion.
- Effective Date: April 1, 2026 with option for earlier adoption. Exam Insight: "Optional earlier adoption" is a key phrase to look for in True/False questions.
- Legal Basis: Sections 45JA, 45L, and 45M of RBI Act. Exam Insight: These are the core sections governing NBFCs.
Summary Table: Disclosures on Exposures to Related Parties
Below is the format for disclosures as mandated by the amendment:
| Sl No. | Particulars | Previous Year (Amount in ₹ crore) | Current Year (Amount in ₹ crore) |
|---|---|---|---|
| A. | Loans to Related Parties | ||
| 1 | Aggregate value of loans sanctioned to related parties during the year | ||
| 2 | Aggregate value of outstanding loans to related parties as on 31st March | ||
| 3 | Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on 31st March | ||
| 4 | Aggregate value of outstanding loans to related parties which are categorized as: | ||
| (i) Special Mention Accounts as on 31st March | |||
| (ii) Non-Performing Assets as on 31st March | |||
| 5 | Amount of provisions held in respect of loans to related parties as on 31st March | ||
| B. | Contracts and Arrangements involving Related Parties | ||
| 6 | Aggregate value of contracts and arrangements awarded to related parties during the year | ||
| 7 | Aggregate value of outstanding contracts and arrangements involving related parties as on 31st March |
Reserve Bank of India (Rural Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026
Background
This RBI circular, dated January 22, 2026, introduces amendments to the existing "Reserve Bank of India (Rural Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025." These changes are necessitated by recent legislative updates, specifically the enactment of the Banking Laws (Amendment) Act, 2025, and subsequent related rules and regulations published in the Gazette of India.
Key Decision
The RBI has exercised its powers under the Banking Regulation Act, 1949, and the RBI Act, 1934, to amend the CRR and SLR directions for Rural Co-operative Banks (RCBs). The amendments primarily involve modifications to specific paragraphs and annexes (forms) within the original directions. These changes include:
- Expansion of Defined Institutions: The term "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" is inserted in paragraph 20 (3).
- Reporting Form Updates:
- Annex I (Form B) is modified to replace certain institutions (like IDBI) with a broader list including the National Bank, Exim Bank, National Housing Bank (NHB), Small Industries Bank (SIDBI), National Bank for Financing Infrastructure and Development (NaBFID), and other development financial institutions.
- Annex II (Form I) and Annex III see the insertion of "IDBI Bank limited" in specific clauses and modifications to the wording related to percentages and notifications by RBI.
- A significant addition to Annex II (Form I) is a new item: "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme."
- Deletion: The words ‘under "Cash in hand" ‘ are deleted from paragraph 28 (4) (v).
These amendments come into force with immediate effect from the date of the circular.
Exam Relevance
For students preparing for banking exams like IBPS AFO, NABARD, and SBI, understanding these amendments is crucial. Questions could arise on:
- SDF Scheme: Added to Form I. Exam Insight: Standing Deposit Facility is now a standard liquidity management tool recognized for CRR/SLR; questions often ask "Which new item is added to Form I?".
- New DFIs: NaBFID, NHB, SIDBI added to Form B. Exam Insight: Expansion of eligible institutions list—memorize NaBFID as the newest addition.
- Cash in Hand: Phrase deleted from Para 28(4)(v). Exam Insight: A subtle technical change that could appear in tough questions.
- Legal Basis: Banking Laws (Amendment) Act, 2025. Exam Insight: Recent legislative changes driving regulatory updates are high-yield.
Summary Table
| Aspect | Previous Provision (Directions, 2025) | Amended Provision (Directions, 2026) |
|---|---|---|
| Effective Date | November 28, 2025 | Immediate effect from January 22, 2026 |
| Paragraph 20 (3) | Did not include specific DFI definition | Inserted "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" |
| Paragraph 28 (4) (v) | Included ‘under "Cash in hand" ‘ | Deleted ‘under "Cash in hand" ‘ |
| Annex I (Form B) - DFIs | Referenced "Industrial Development Bank of India, National Bank for Agriculture and Rural Development, Export-Import Bank of India" | Substituted with "the National Bank, Exim Bank, the National Housing Bank, the Small Industries Bank, the National Bank for Financing Infrastructure and Development or other development financial institution" |
| Annex II (Form I) | No explicit mention of SDF | New item inserted: "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme" |
| Annex II (Form I) & III | Did not include "IDBI Bank limited" in I (a) (i) and III (a) | Inserted "IDBI Bank limited" in I (a) (i) and III (a) |
Reserve Bank of India (Urban Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026
Background
This RBI circular, dated January 22, 2026, introduces amendments to the existing Reserve Bank of India (Urban Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025 (dated November 28, 2025). These changes are a direct result of recent legislative updates, specifically the enactment of the Banking Laws (Amendment) Act, 2025, and subsequent publications like the Banking Regulation (Co-operative Societies) Amendment Rules, 2025, and the Reserve Bank of India Scheduled Banks' (Amendment) Regulations 2025. The amendments aim to align the regulatory framework for Urban Co-operative Banks (UCBs) with these updated laws.
Key Decision
The Reserve Bank of India, exercising its powers under various sections of the Banking Regulation Act, 1949, and the RBI Act, 1934, has issued these Amendment Directions with immediate effect. The core modifications primarily focus on updating definitions, including new financial institutions, and streamlining reporting requirements for UCBs concerning their Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) obligations. Key changes include:
- Expanded Definition of DFIs: Paragraph 20(3) now explicitly includes "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934."
- Updated Institutions in Reporting Forms: In Annex I (Form B), traditional mentions like "Industrial Development Bank of India" are replaced or expanded to include a broader range of institutions such as "the National Bank (NABARD), Exim Bank, the National Housing Bank (NHB), the Small Industries Bank (SIDBI), the National Bank for Financing Infrastructure and Development (NaBFID) or other development financial institution." Similarly, "Industrial Development Bank of India" is deleted from specific footnotes, with NHB and SIDBI inserted.
- Specific Inclusion of IDBI Bank Ltd: "IDBI Bank limited" has been explicitly inserted in Annex II (Form I) and Annex III.
- Deletion of 'Cash in Hand' Phrase: The words ‘under "Cash in hand" ‘ are deleted from paragraph 28(4)(v), simplifying certain reporting elements.
- Clarifications on Percentages: In Annex II and III, phrases like "(or a higher specified percentage)" are deleted, and specific wording like "such" and "as notified by the Reserve Bank" is inserted for clarity regarding CRR/SLR percentages.
- Inclusion of Standing Deposit Facility (SDF): A significant addition is the new item, "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme," inserted in Annex II (Form I). This indicates that funds parked under the SDF scheme are now explicitly recognized in certain CRR/SLR reporting computations for UCBs.
Exam Relevance
For students preparing for banking exams like IBPS AFO, NABARD, and SBI, this circular is important for understanding the evolving regulatory landscape for Co-operative Banks.
- SDF Scheme: Added to Form I. Exam Insight: Standing Deposit Facility is now a standard liquidity management tool recognized for CRR/SLR (consistent across all bank types).
- IDBI Bank: Explicitly inserted. Exam Insight: Specific entity inclusion relevant for UCBs.
- Legal Basis: Banking Regulation Act Section 56 (AACS). Exam Insight: "AACS" stands for Application to Co-operative Societies - a crucial section for any Coop Bank question.
- New Institutions: NaBFID, NHB, SIDBI added. Exam Insight: Memorize the full list of new DFIs.
Summary Table
| Area of Amendment | Previous Status (Implied/Older) | Current Status (Amendment) |
|---|---|---|
| Para 20(3) DFI Definition | Less explicit / General DFI references | "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" inserted |
| Para 28(4)(v) 'Cash in hand' | Phrase 'under "Cash in hand" ' used | Phrase ‘under "Cash in hand" ‘ deleted |
| Annex I (Form B) Institutions | Industrial Development Bank of India, National Bank for Agriculture and Rural Development, Export-Import Bank of India | "the National Bank, Exim Bank, the National Housing Bank, the Small Industries Bank, the National Bank for Financing Infrastructure and Development or other development financial institution" substituted; IDBI deleted and NHB, SIDBI, NaBFID, other DFI inserted in item 2. |
| Annex II & III (IDBI Bank Ltd) | Not explicitly mentioned in these forms | "IDBI Bank limited" inserted |
| Annex II & III (Percentages) | "(or a higher specified percentage)" | Phrase deleted; "such" and "as notified by the Reserve Bank" inserted |
| Annex II (Form I) New Item | Not explicitly listed | "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme" inserted |
Reserve Bank of India (Local Area Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026
Background
This RBI circular, dated January 22, 2026, introduces amendments to the existing Reserve Bank of India (Local Area Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025 (dated November 28, 2025). These changes are necessitated by recent legislative developments, specifically the enactment of the Banking Laws (Amendment) Act, 2025, the Banking Regulation (Companies) Amendment Rules, 2025, and the Reserve Bank of India Scheduled Banks' (Amendment) Regulations 2025. The amendments aim to update the regulatory framework for Local Area Banks (LABs) in line with these new laws.
Key Decision
The Reserve Bank of India (RBI), exercising its powers under Section 35A of the Banking Regulation Act, 1949, Section 42 of the Reserve Bank of India Act, 1934, and Sections 18 and 24 of the Banking Regulation Act, 1949, has issued these Amendment Directions. The key modifications include:
- Broadening Definition: In paragraph 16 (1), the phrase "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" has been inserted, expanding the scope of institutions.
- Deletion: In paragraph 23 (5) (v), the words 'under "Cash in hand"' have been removed.
- Expanded DFI List in Forms:
- In Annex I (Form A), the list "National Bank for Agriculture and Rural Development, Export Import Bank of India" is replaced with a more comprehensive list: "the Exim Bank, the National Housing Bank, the National Bank, the Small Industries Bank, the National Bank for Financing Infrastructure and Development or the other development financial institution".
- Similarly, in Annex II (Form VIII), "Export-Import Bank of India and National Bank for Agriculture and Rural Development" is substituted with "Exim Bank, National Bank, National Housing Bank, Small Industries Bank, National Bank for Financing Infrastructure and Development and other development financial institutions as defined in section 2 (cccii) of the Reserve Bank of India Act, 1934".
- Terminology Update: In Annex II (Form VIII), the word "specified" is replaced with "notified", and "from time to time" is deleted.
- New Reporting Item: A new item, "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme", has been inserted into Annex II (Form VIII).
These directions come into force with immediate effect from January 22, 2026.
Exam Relevance
For IBPS AFO, NABARD, and SBI exams, this circular is relevant for understanding:
- NaBFID Inclusion: Added to Form A/B. Exam Insight: National Bank for Financing Infrastructure and Development is the key new addition.
- SDF: Inclusion of Standing Deposit Facility in reporting. Exam Insight: Standard liquidity tool now reported by LABs too.
- Cash in Hand: Deletion of phrase. Exam Insight: Subtle technical simplified reporting.
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Reserve Bank of India (Local Area Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026 |
| Applicable To | Local Area Banks (LABs) |
| Core Subject | Amendments to Cash Reserve Ratio (CRR) & Statutory Liquidity Ratio (SLR) Directions |
| Primary Legal Basis | Sec 35A, 18, 24 of Banking Regulation Act, 1949; Sec 42 of RBI Act, 1934 |
| Effective Date | January 22, 2026 (Immediate effect) |
| Key Changes | Expanded list of Development Financial Institutions (DFIs) in reporting forms; Deletion/Substitution of specific phrases; Inclusion of Standing Deposit Facility (SDF) in Form VIII reporting. |
Reserve Bank of India (Regional Rural Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026
Welcome, AgriDots aspirants! Let's break down this crucial RBI circular for your IBPS AFO, NABARD, and SBI exams.
Background
This circular, issued on January 22, 2026, serves as an amendment to the existing Reserve Bank of India (Regional Rural Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025, which were initially released on November 28, 2025. The need for these amendments arose from recent legislative changes, specifically the enactment of the Banking Laws (Amendment) Act, 2025, the Banking Regulation (Companies) Amendment Rules, 2025, and the Reserve Bank of India Scheduled Banks' (Amendment) Regulations 2025.
The RBI has exercised its powers under key sections of banking legislation, including Section 35A, Section 18, and Section 24 of the Banking Regulation Act, 1949, and Section 42 of the Reserve Bank of India Act, 1934, to make these changes in the public interest.
Key Decision
These Amendment Directions specifically modify the rules governing Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) for Regional Rural Banks (RRBs). The core objective is to update and clarify various definitions and reporting requirements to align with the new legal framework and evolving financial landscape. The provisions of these amendments come into force with immediate effect.
Key changes include:
- Expanded Definition of DFIs: The term "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" has been explicitly added to paragraph 19(1).
- Reporting Changes: The phrase 'under "Cash in hand"' has been deleted from paragraph 27(6)(v), streamlining cash reporting.
- Updated List of Institutions: In reporting forms (Annex I - Form A and Annex II - Form VIII), the list of specific institutions like NABARD and Exim Bank has been replaced with a broader inclusion of various Development Financial Institutions (DFIs) such as Exim Bank, National Housing Bank (NHB), National Bank (NABARD), Small Industries Bank (SIDBI), and National Bank for Financing Infrastructure and Development (NaBFID).
- New Item in Form VIII: A significant addition is the insertion of "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme" in Annex II (Form VIII), requiring RRBs to report their SDF balances.
Exam Relevance
This circular is highly relevant for your banking exams due to its focus on core banking regulations (CRR/SLR) and institutions crucial for agricultural and rural finance (RRBs, NABARD, other DFIs).
- NaBFID: Added to DFI list. Exam Insight: RRBs now recognize NaBFID - shows rural-infra linkage.
- SDF: Added to Form VIII. Exam Insight: Standing Deposit Facility is now universal.
- Section 2(cccii): Definition of DFIs. Exam Insight: Note the specific section of RBI Act used for defining DFIs.
- Legal Basis: Banking Laws (Amendment) Act, 2025. Exam Insight: The governing act update is the "reason why".
Summary Table
| Aspect | Original (Implied) | Amendment / Key Change |
|---|---|---|
| Circular Date | - | January 22, 2026 |
| Effective Date | - | Immediate effect |
| Para 19(1) | Limited DFI Scope | Inserts "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934". |
| Para 27(6)(v) | Includes "Cash in hand" | Deletes 'under "Cash in hand"'. |
| Annex I (Form A) & Annex II (Form VIII) - Institutions | Lists specific DFIs (e.g., NABARD, Exim Bank) | Substitutes with a broader list: Exim Bank, National Housing Bank, National Bank (NABARD), Small Industries Bank (SIDBI), National Bank for Financing Infrastructure and Development (NaBFID), and other development financial institutions. |
| Annex II (Form VIII) - New Item | Not present | Inserts "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme". |
| Power derived from | - | Section 35A, 18, 24 of Banking Regulation Act, 1949 & Section 42 of RBI Act, 1934. |
RBI (Small Finance Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) regularly updates its regulations to reflect changes in the financial landscape and legislative framework. This circular introduces amendments to the existing "Reserve Bank of India (Small Finance Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025," which were originally issued on November 28, 2025.
These amendments are a direct consequence of recent legislative changes, specifically the enactment of the Banking Laws (Amendment) Act, 2025, the Banking Regulation (Companies) Amendment Rules, 2025, and the Reserve Bank of India Scheduled Banks' (Amendment) Regulations 2025. The RBI has exercised its powers under Section 35A of the Banking Regulation Act, 1949, and Section 42 of the RBI Act, 1934, along with Sections 18 and 24 of the Banking Regulation Act, 1949, to issue these modifications in the public interest.
Key Decisions
This circular introduces several key modifications to the existing directions for Small Finance Banks (SFBs) regarding their Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) compliance and reporting:
- Expanded Definition of Development Financial Institutions (DFIs): The term "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" is now explicitly inserted into paragraph 19(1), broadening the scope of institutions considered.
- Deletion of "Cash in hand" Clause: In paragraph 28(6)(v), the specific mention "under "Cash in hand"" has been removed, streamlining reporting requirements.
- Updated Institutions in Reporting Forms (Annex I - Form A): The list of institutions in Form A for reporting has been updated. Previously, it specifically mentioned "National Bank for Agriculture and Rural Development, Export Import Bank of India." This has been substituted with a more comprehensive list including "the Exim Bank, the National Housing Bank, the National Bank, the Small Industries Bank, the National Bank for Financing Infrastructure and Development or the other development financial institution." This reflects the evolving landscape of Indian financial institutions.
- Updated Institutions & Terminology in Reporting Forms (Annex II - Form VIII): Similar to Form A, Form VIII also sees an expanded list of institutions, replacing specific mentions of "Export-Import Bank of India and National Bank for Agriculture and Rural Development" with "Exim Bank, National Bank, National Housing Bank, Small Industries Bank, National Bank for Financing Infrastructure and Development and other development financial institutions as defined in section 2 (cccii) of the Reserve Bank of India Act, 1934." Additionally, the word "specified" is replaced with "notified," and "from time to time" is deleted, indicating a more fixed framework.
- Inclusion of Standing Deposit Facility (SDF) in Form VIII: A significant addition to Form VIII is a new item: "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme." This mandates SFBs to report their deposits under the SDF scheme.
- Immediate Effect: All these amendment directions came into force with immediate effect from January 22, 2026.
Exam Relevance
For banking exams like IBPS AFO, NABARD, and SBI, understanding such amendments is crucial. Here's why:
- NaBFID: Added to DFI list. Exam Insight: Consistent addition across all bank types.
- SDF: Added to reporting. Exam Insight: SDF is the key monetary policy tool for liquidity absorption.
- Terminology: Changed from "specified" to "notified". Exam Insight: Subtle shift in regulatory language implying more formal notifications.
Summary Table: Key Amendments for SFBs
| Aspect of Change | Detail |
|---|---|
| DFI Definition Expansion | Paragraph 19(1) now explicitly includes "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934." |
| Deletion from Paragraph 28(6)(v) | The words 'under "Cash in hand"' have been removed. |
| Reporting Form A (Annex I) Update | List of institutions updated to include Exim Bank, NHB, National Bank (NABARD), SIDBI, NaBFID, and other DFIs. |
| Reporting Form VIII (Annex II) Update | List of institutions expanded similarly to Form A. Terminology changed from "specified" to "notified." "from time to time" deleted. |
| SDF Scheme Inclusion | A new item, "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme," inserted into Form VIII. |
| Effective Date | Immediate effect from January 22, 2026. |
Reserve Bank of India (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) issued these amendment directions on January 22, 2026, building upon the previous Reserve Bank of India (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025 dated November 28, 2025. These amendments were necessitated by recent legislative changes, specifically the enactment of the Banking Laws (Amendment) Act, 2025, and the subsequent publication of the Banking Regulation (Companies) Amendment Rules, 2025 (December 10, 2025) and the Reserve Bank of India Scheduled Banks' (Amendment) Regulations 2025 (January 15, 2026). The RBI exercised its powers under Section 35A of the Banking Regulation Act, 1949, and Section 42 of the Reserve Bank of India Act, 1934, to implement these changes in the public interest.
Key Decision
This circular primarily modifies the existing framework for Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) for commercial banks. The key decisions involve:
- Expanding the definition of eligible institutions: Including "other development financial institutions" in various paragraphs and forms related to CRR/SLR calculations and reporting.
- Streamlining reporting requirements: Deleting obsolete phrases like 'under "Cash in hand"' and removing "from time to time."
- Updating institutional names: Replacing older mentions of specific institutions (e.g., NABARD, Exim Bank) with a broader, more current list including the Exim Bank, National Housing Bank, National Bank, Small Industries Bank, National Bank for Financing Infrastructure and Development, and other development financial institutions.
- Incorporating new instruments: Inserting "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme" into Annex II (Form VIII), recognizing its role in liquidity management.
- Clarifying terminology: Substituting "specified" with "notified."
Exam Relevance
This circular is highly relevant for banking exams like IBPS AFO, NABARD, and SBI because it directly impacts the fundamental concepts of CRR and SLR, which are core topics in banking awareness and financial sector knowledge.
- Banking Laws (Amendment) Act, 2025: The driver of these changes. Exam Insight: Major Act amendments are high-probability questions.
- SDF: Inclusion in reporting. Exam Insight: Replaces/complements Reverse Repo in liquidity management discussions.
- DFIs List: NaBFID, NHB, SIDBI added. Exam Insight: Know that Commercial Banks must now explicitly report these in CRR/SLR forms.
Summary Table
| Aspect | Old Provision (Directions, 2025) | New Provision (Amendment Directions, 2026) |
|---|---|---|
| Para 19(1) (Eligible institutions) | (Implied limited scope) | Inserted: "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" |
| Para 28(6)(v) (Reporting) | Included words 'under "Cash in hand"' | Deleted: 'under "Cash in hand"' |
| Annex I (Form A) (Substituted Entities) | "National Bank for Agriculture and Rural Development, Export Import Bank of India" | Substituted with: "the Exim Bank, the National Housing Bank, the National Bank, the Small Industries Bank, the National Bank for Financing Infrastructure and Development or the other development financial institution" |
| Annex II (Form VIII) (Substituted Entities) | "Export-Import Bank of India and National Bank for Agriculture and Rural Development" | Substituted with: "Exim Bank, National Bank, National Housing Bank, Small Industries Bank, National Bank for Financing Infrastructure and Development and other development financial institutions as defined in section 2 (cccii) of the Reserve Bank of India Act, 1934" |
| Annex II (Form VIII) (Terminology) | "specified", "from time to time" | Substituted with "notified", "from time to time" deleted |
| Annex II (Form VIII) (New Item) | (Not present) | Inserted: "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme" |
Interest Subvention for Pre- and Post- Shipment Export Credit under Export Promotion Mission (EPM) – Niryat Prothsahan
Background
The Government of India (GoI) has launched a new scheme called "Niryat Prothsahan" under the Export Promotion Mission (EPM) on a pilot basis. This scheme aims to provide interest subvention (a subsidy on interest) for pre- and post-shipment export credit. The Reserve Bank of India (RBI) has issued this circular to all eligible lending institutions, instructing them on how to implement this new scheme.
Key Decision
The RBI has directed all eligible lending institutions to extend the benefit of interest subvention to eligible exporters. This must be done strictly according to the operational instructions issued by the Directorate General of Foreign Trade (DGFT) and in compliance with existing RBI regulations. Lending institutions must ensure that the interest subvention is only given for eligible export credit and that claims are submitted as per prescribed procedures.
Exam Relevance
- Scheme Name: Niryat Prothsahan (under Export Promotion Mission). Exam Insight: Schemes with Hindi names are frequently asked ("What is the new scheme Niryat Prothsahan related to?").
- Agencies Involved: RBI (Regulatory) and DGFT (Operational). Exam Insight: Know the division of labor—DGFT issues trade notices, RBI instructs banks.
- Eligible Credit: Covers both Pre- and Post-shipment export credit. Exam Insight: Scope questions (Does it cover pre-shipment? Yes).
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Interest Subvention for Pre- and Post- Shipment Export Credit under Export Promotion Mission (EPM) – Niryat Prothsahan |
| Circular No. | RBI/2025-26/195 DOR.STR.REC.393/04.02.001/2025-26 |
| Date of Issue | January 19, 2026 |
| Issued By | Reserve Bank of India (RBI) |
| Addressed To | All Scheduled Commercial Banks (excluding RRBs), Primary (Urban) Co-operative Banks, State Co-operative Banks, All-India Financial Institutions. |
| Key Objective | To operationalize the Government of India's "Niryat Prothsahan" scheme, providing interest subvention for export credit to boost exports. |
| Implementing Authority | Directorate General of Foreign Trade (DGFT) issued operational instructions via Trade Notices (No. 20/2025-26 dated Jan 2, 2026 and No. 22/2025-26 dated Jan 16, 2026). |
| Key Action for Banks | Extend interest subvention to eligible exporters as per DGFT instructions and RBI's extant regulatory guidelines, ensuring claims are submitted correctly. |
RBI/FIDD/2025-26/196 FIDD.CO.PSD.BC.No.11/04.09.001/2025-26 - Reserve Bank of India (Priority Sector Lending – Targets and Classification) (Amendment) Directions, 2026
Background
This circular, issued on January 19, 2026, by the Reserve Bank of India (RBI), introduces amendments to the existing "Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025." These changes are made in the public interest, leveraging powers granted by the Banking Regulation Act, 1949, to refine and update the Priority Sector Lending (PSL) framework.
Key Decision
The RBI has partially modified, deleted, or inserted several paragraphs and items within the 2025 PSL Directions. These modifications impact various aspects of PSL, including:
- ANBC (Adjusted Net Bank Credit) and CEOBSE (Credit Equivalent of Off-Balance Sheet Exposures) calculations: Clarifications and updated references for their computation.
- PSL Targets: Specific changes to the overall PSL targets and sub-targets for different categories of banks like Small Finance Banks (SFBs), Regional Rural Banks (RRBs), and Foreign Banks.
- Eligible Loans: Updated definitions and limits for categories such as export credit, housing loans, healthcare facilities, and microfinance.
- Treatment of Grandfathered Loans: Special provisions for SFBs converting from existing NBFCs/MFIs.
- Securitisation, Transfer of Loan Exposures, and IBPCs: Revised guidelines to align with new directions.
- Priority Sector Lending Certificates (PSLCs): Introduction of a new annex for detailed guidelines.
- On-lending by MFIs and NBFCs: New requirements for external auditor certificates to prevent double-counting of PSL benefits.
Exam Relevance
- SFB Target Change: Target modified to 60% of ANBC/CEOBSE. Exam Insight: This is a massive update if the previous target was 75%; verify if this is a sub-target or overall. The circular implies a major shift.
- RRB Target: Stays high at 75%. Exam Insight: Compare SFB (60%) vs RRB (75%) targets—a classic comparison question.
- Housing Loan Cap: ₹12 Crore limit for Tier II-VI centers. Exam Insight: Specific loan limits are gold for objective questions.
- HFC On-lending: Cap is ₹20 Lakh per borrower. Exam Insight: Don't confuse on-lending caps with direct lending caps.
Summary Table
| Aspect | New/Modified Provision | Affected Banks |
|---|---|---|
| Small Finance Banks (SFBs) Total PSL Target | Modified to 60% of ANBC or CEOBSE, whichever is higher. Note: Previous general target for SFBs was 75%. This circular implies a change or clarification to 60%. | Small Finance Banks |
| Regional Rural Banks (RRBs) PSL Target | 75% of ANBC or CEOBSE. Lending to Medium Enterprises, Social Infrastructure, and Renewable Energy reckoned up to 15% of ANBC only. | Regional Rural Banks |
| Foreign Banks (<20 branches) PSL Sub-targets | Total PSL 40% of ANBC; up to 32% in Export Credit and not less than 8% to any other priority sector. | Foreign Banks with less than 20 branches |
| Loans for Healthcare Facilities | Up to ₹12 crore per borrower for facilities in Tier II to VI centres. For UCBs, Category ‘D’ centres with population less than 1 lakh. | All Banks (specifically UCBs mentioned for their centres) |
| Bank Credit to HFCs for Housing (on-lending) | Eligible for PSL up to an aggregate loan limit of ₹20 lakh per borrower. | All Banks lending to HFCs |
| Population-based classifications (Housing Loans) | Refer to Census 2011 “A-04” table for Urban Agglomerations (U.A.s)/ Towns. For villages/rural areas not in A-04, adhere to loan limits for “Centres with population below 10 lakh”. | All Banks |
| PSL Status on Grandfathered Loans for SFBs (NBFC/MFI conversion) | Lending banks can avail PSL for loans made to such NBFCs/MFIs (if assets are PSL eligible), limited to actual outstanding balance. Assets financed from these loans by SFB not reckoned for SFB's ANBC for PSL calculation to that extent. | Small Finance Banks (and banks lending to them) |
| Securitisation/Purchase of Loan Exposures | Must fulfill “Reserve Bank of India (Securitisation Transactions) Directions, 2025” and “Reserve Bank of India (Transfer and Distribution of Credit Risk) Directions, 2025”. | Commercial Banks, Small Finance Banks (Not LABs, RRBs, UCBs) |
| Microfinance/NBFC On-lending for PSL | Banks must obtain external auditors’ certificates from MFIs/NBFCs confirming that on-lending benefit has not been claimed from any other bank. | All Banks lending to MFIs/NBFCs |
| PSLC Scheme | A new Annex IIIA providing details of the Priority Sector Lending Certificate (PSLC) Scheme shall be inserted. | All Banks (SFBs specifically for sub-targets) |
Reserve Bank of India (Rural Co-operative Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) regularly reviews and updates its regulatory framework to enhance transparency, strengthen governance, and ensure robust risk management within the banking sector. This circular introduces amendments to the existing "Reserve Bank of India (Rural Co-operative Banks – Financial Statements: Presentation and Disclosures) Directions, 2025". This specific amendment is a consequence of the new "Reserve Bank of India (Rural Co-operative Banks – Credit Risk Management) – Amendment Directions, 2026," signifying RBI's continuous effort to align disclosure norms with updated risk management guidelines.
Key Decision
The core amendment mandates Rural Co-operative Banks (RCBs) to disclose detailed information regarding their exposures to related parties in the Notes to Accounts of their financial statements. This new disclosure requirement aims to bring greater transparency to transactions with entities that have a close relationship with the bank, which can often pose potential conflicts of interest or heightened credit risk. The definition of 'related parties' will be as per the Reserve Bank of India (Rural Co-operative Banks – Credit Risk Management) Directions, 2025.
Exam Relevance
- New Disclosure: Related Party Exposures in Notes to Accounts.
- Specific Items: Loans (Sanctioned/Outstanding/SMA/NPA) and Contracts. Exam Insight: Granularity of disclosure.
- Effective Date: April 1, 2026.
- Applicability: Rural Co-operative Banks. Exam Insight: Note that this mirrors the requirement for other banks, normalizing the sector.
Summary Table: Related Party Disclosure Requirements for RCBs
| Sl. No. | Particulars of Disclosure | Category |
|---|---|---|
| A. | Loans to Related Parties | |
| 1. | Aggregate value of loans sanctioned during the year | Monetary Value |
| 2. | Aggregate value of outstanding loans as on March 31 | Monetary Value |
| 3. | Outstanding loans as a proportion of total credit exposure | Percentage (%) |
| 4. | Outstanding loans categorized as: | |
| - Special Mention Accounts (SMAs) as on March 31 | Monetary Value | |
| - Non-Performing Assets (NPAs) as on March 31 | Monetary Value | |
| 5. | Amount of provisions held for related party loans | Monetary Value |
| B. | Contracts and Arrangements involving Related Parties | |
| 6. | Aggregate value of contracts/arrangements awarded during the year | Monetary Value |
| 7. | Aggregate value of outstanding contracts/arrangements | Monetary Value |
Effective Date: April 1, 2026 (Banks may choose to implement earlier).
RBI (Urban Co-operative Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
This circular, dated January 05, 2026, serves as an amendment to the existing "Reserve Bank of India (Urban Co-operative Banks - Financial Statements: Presentation and Disclosures) Directions, 2025". The necessity for this amendment arose directly from the recent issuance of the "Reserve Bank of India (Urban Co-operative Banks – Credit Risk Management) – Amendment Directions, 2026".
The Reserve Bank of India (RBI) has issued these amendments under the powers granted by sections 35A read with Section 56 of the Banking Regulation Act, 1949, along with other enabling provisions, deeming it necessary and in the public interest.
Key Decision
The primary decision of this circular is to introduce a new, mandatory disclosure requirement for Urban Co-operative Banks (UCBs) in their financial statements. Specifically, a new sub-sub-paragraph 10(5)(viii) titled "Exposures to Related Parties" will be inserted into Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’, under sub-paragraph 10(5) on ‘Exposures’.
UCBs will now be required to disclose detailed information regarding their exposures to "related parties," as defined in the Reserve Bank of India (Urban Co-operative Banks – Credit Risk Management) Directions, 2025. This includes granular data on loans sanctioned, outstanding amounts, their proportion to total credit exposure, classification as Special Mention Accounts (SMAs) or Non-Performing Assets (NPAs), provisions held, and any contracts or arrangements involving related parties.
These amendments are effective from April 1, 2026. However, banks have the discretion to implement these changes earlier if they choose.
Exam Relevance
- Specific Clause: New sub-sub-paragraph 10(5)(viii) inserted. Exam Insight: In-depth exams (Grade B) ask for specific clause numbers.
- Data Points: Disclose sanctioned loans, outstanding amounts, and SMA/NPA status of related parties. Exam Insight: The inclusion of SMA/NPA status makes this a risk-focused disclosure.
- Effective Date: April 1, 2026.
Summary Table: New Disclosures for UCBs (Amount in ₹ crore)
| Sl No. | Particulars |
|---|---|
| A. | Loans to Related Parties |
| 1 | Aggregate value of loans sanctioned to related parties during the year |
| 2 | Aggregate value of outstanding loans to related parties as on 31st March |
| 3 | Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on 31st March |
| 4 | Aggregate value of outstanding loans to related parties which are categorized as: |
| (i) Special Mention Accounts as on 31st March | |
| (ii) Non-Performing Assets as on 31st March | |
| 5 | Amount of provisions held in respect of loans to related parties as on 31st March |
| B. | Contracts and Arrangements involving Related Parties |
| 6 | Aggregate value of contracts and arrangements awarded to related parties during the year |
| 7 | Aggregate value of outstanding contracts and arrangements involving related parties as on 31st March |
Reserve Bank of India (Regional Rural Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) regularly reviews and updates its regulatory framework to ensure sound financial practices and transparency across the banking sector. This particular circular, RBI/2025-26/184 dated January 05, 2026, introduces amendments to the existing 'Reserve Bank of India (Regional Rural Banks - Financial Statements: Presentation and Disclosures) Directions, 2025'. The primary impetus for these changes is the prior issuance of 'Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2026'. Essentially, to harmonize the financial statement disclosure requirements with the updated credit risk management guidelines for Regional Rural Banks (RRBs), this amendment became necessary. The RBI, in exercising its powers under Sections 21 and 35A of the Banking Regulation Act, 1949, deemed these amendments necessary and expedient in the public interest.
Key Decision
The core decision of this circular is the mandatory introduction of a new, detailed disclosure requirement for all Regional Rural Banks (RRBs) within their annual financial statements. This new disclosure will be part of the ‘Notes to Accounts’ section under sub-paragraph 10(5) on ‘Exposures’ in Chapter-III ‘Disclosure in Financial Statements’. A new sub-sub paragraph 10(5)(ix) is specifically inserted for this purpose.
This new sub-sub paragraph mandates RRBs to provide comprehensive details concerning their 'Exposures to Related Parties'. The disclosures are categorized as follows:
- Loans to Related Parties: RRBs must report:
- Aggregate value of loans sanctioned to related parties during the financial year.
- Aggregate value of outstanding loans to related parties as on March 31st.
- Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on March 31st.
- Aggregate value of outstanding loans to related parties categorized as:
- Special Mention Accounts (SMAs) as on March 31st.
- Non-Performing Assets (NPAs) as on March 31st.
- Amount of provisions held in respect of loans to related parties as on March 31st.
- Contracts and Arrangements involving Related Parties: RRBs must disclose:
- Aggregate value of contracts and arrangements awarded to related parties during the financial year.
- Aggregate value of outstanding contracts and arrangements involving related parties as on March 31st.
The definition of 'Related Parties' for the purpose of these disclosures will be as defined in the 'Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025'. These amendments will come into force from April 1, 2026, though banks have the option to implement them earlier.
Exam Relevance
- Targeted: RRBs only. Exam Insight: Specificity to Regional Rural Banks is key.
- Legal Basis: Sections 21 and 35A of Banking Regulation Act. Exam Insight: Standard sections for direction issuance.
- Disclosure: Related Party Exposures. Exam Insight: Note the effective date (April 1, 2026) and the optional early adoption clause.
Summary Table: Key Disclosures for RRBs on Related Party Exposures
| Sl. No. | Category | Specific Disclosure Requirements (as of March 31st, unless specified) |
|---|---|---|
| A | Loans to Related Parties | |
| 1 | Loans Sanctioned | Aggregate value of loans sanctioned to related parties during the year. |
| 2 | Outstanding Loans | Aggregate value of outstanding loans to related parties. |
| 3 | Proportion of Total Credit | Outstanding loans to related parties as a proportion of total credit exposure. |
| 4 | Categorization of Outstanding Loans | Split into (i) Special Mention Accounts (SMAs) and (ii) Non-Performing Assets (NPAs). |
| 5 | Provisions Held | Amount of provisions held in respect of loans to related parties. |
| B | Contracts and Arrangements | |
| 6 | Contracts Awarded | Aggregate value of contracts and arrangements awarded to related parties during the year. |
| 7 | Outstanding Contracts | Aggregate value of outstanding contracts and arrangements involving related parties. |
| Effective Date | April 1, 2026 (Banks may implement earlier) |
Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026 (RBI/2025-26/183 DOR.CRE.REC.385/21-04-018/2025-26)
Background
This RBI circular, issued on January 05, 2026, introduces important amendments to the existing "Reserve Bank of India (Local Area Banks - Financial Statements: Presentation and Disclosures) Directions, 2025". The primary reason for this amendment is a review conducted by the RBI, which followed the issuance of the "Reserve Bank of India (Local Area Banks – Credit Risk Management) – Amendment Directions, 2026". The RBI is exercising its powers under Sections 21 and 35A of the Banking Regulation Act, 1949, to ensure greater transparency and public interest.
Key Decision
The main decision in this circular is the mandatory insertion of a new sub-sub paragraph, 10(5)(ix), under Chapter-III, titled ‘Disclosure in Financial Statements – Notes to Accounts’, specifically within sub-paragraph 10(5) on ‘Exposures’.
This new section requires Local Area Banks (LABs) to disclose comprehensive details regarding their "Exposures to Related Parties". The definition of "Related Parties" for this purpose will be as specified in the "Reserve Bank of India (Local Area Banks – Credit Risk Management) Directions, 2025".
The disclosures will cover:
- Loans to Related Parties:
- Aggregate value of loans sanctioned during the year.
- Aggregate value of outstanding loans as on March 31st.
- Outstanding loans as a proportion of total credit exposure.
- Classification of outstanding loans as Special Mention Accounts (SMA) or Non-Performing Assets (NPA).
- Amount of provisions held against these loans.
- Contracts and Arrangements involving Related Parties:
- Aggregate value of contracts/arrangements awarded during the year.
- Aggregate value of outstanding contracts/arrangements as on March 31st.
These amendments are to come into force from April 1, 2026. However, banks have the discretion to implement these changes earlier if they choose.
Exam Relevance
- Targeted: Local Area Banks (LABs).
- Legal Basis: Sections 21 and 35A of BR Act.
- Disclosure: Related Party Exposures (Loans/Contracts). Exam Insight: Focus on the granularity (SMA/NPA status).
- Effective Date: April 1, 2026.
Summary Table
| Particulars | Details |
|---|---|
| Circular Title | Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026 |
| RBI Reference No. | RBI/2025-26/183 DOR.CRE.REC.385/21-04-018/2025-26 |
| Date of Issue | January 05, 2026 |
| Applicability | Local Area Banks (LABs) |
| Purpose | Amend existing directions for financial statement presentation and disclosures. |
| Key Amendment | Introduction of mandatory disclosures for 'Exposures to Related Parties' in the 'Notes to Accounts' section of financial statements. |
| Legal Basis | Sections 21 and 35A of the Banking Regulation Act, 1949. |
| Effective Date | April 1, 2026 (Banks may implement earlier). |
| Disclosure Contents | Details on loans (sanctioned, outstanding, SMA/NPA, provisions) and contracts/arrangements involving related parties. |
Reserve Bank of India (Small Finance Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Circular Ref: RBI/2025-2026/182DOR.CRE.REC.383/21.04.018/2025-26 Date: January 05, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its regulatory framework to ensure the stability and transparency of the Indian financial system. This particular circular amends the existing "Reserve Bank of India (Small Finance Banks – Financial Statements: Presentation and Disclosures) Directions, 2025". The amendment is a direct consequence of the recent "Reserve Bank of India (Small Finance Banks – Credit Risk Management) – Amendment Directions, 2026". The RBI issued these changes under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, deeming it necessary and in the public interest.
Key Decision
The core of this amendment is the introduction of a new sub-paragraph 10(5)(ix) within Chapter-III, titled 'Disclosure in Financial Statements – Notes to Accounts', under the existing sub-paragraph 10(5) on ‘Exposures’. This new section mandates Small Finance Banks (SFBs) to disclose detailed information regarding their 'Exposures to Related Parties'.
SFBs will now need to present the following data (in ₹ crore) for both the previous and current year in their financial statements:
- Loans to Related Parties:
- Aggregate value of loans sanctioned during the year.
- Aggregate value of outstanding loans as on March 31st.
- Aggregate value of outstanding loans as a proportion of total credit exposure as on March 31st.
- Aggregate value of outstanding loans categorized as Special Mention Accounts (SMAs) and Non-Performing Assets (NPAs) as on March 31st.
- Amount of provisions held in respect of these loans as on March 31st.
- Contracts and Arrangements involving Related Parties:
- Aggregate value of contracts and arrangements awarded during the year.
- Aggregate value of outstanding contracts and arrangements as on March 31st.
These disclosures aim to enhance transparency and provide a clearer picture of an SFB's dealings with related entities, which is crucial for assessing potential conflicts of interest and credit risk management.
Exam Relevance (IBPS AFO, NABARD, SBI)
- New Disclosure: Related Party Exposures in Notes to Accounts.
- Chapter Reference: Inserted in Chapter-III, 10(5)(ix). Exam Insight: Specific chapter references can separate top scorers.
- Legal Basis: Sections 21 and 35A of BR Act.
- Effective Date: April 1, 2026.
Summary Table
| Aspect | Details |
|---|---|
| Circular Topic | Amendment to Financial Statements: Presentation and Disclosures for Small Finance Banks (SFBs) |
| Key Change | Introduction of mandatory detailed disclosures for 'Exposures to Related Parties' in the 'Notes to Accounts' of SFBs' financial statements. |
| Applicability | All Small Finance Banks (SFBs). |
| Legal Basis | Sections 21 and 35A of the Banking Regulation Act, 1949. |
| Effective Date | April 1, 2026. (Banks may implement earlier). |
| Purpose | To enhance transparency, governance, and provide a clearer picture of SFBs' dealings with related entities, aiding in the assessment of credit risk and potential conflicts of interest. |
RBI/2025-2026/179DOR.CRE.REC.380/07-02-008/2025-26: Amendment to NBFC Credit Risk Management Directions
Background
This RBI circular is an amendment to the existing Reserve Bank of India (Non-Banking Financial Companies - Credit Risk Management) Directions, 2025. The RBI constantly reviews its regulations to ensure robust financial stability and good governance across the banking and non-banking sectors. The primary goal of this amendment is to strengthen the rules and procedures surrounding "Lending to Related Parties" by Non-Banking Financial Companies (NBFCs). This is crucial to prevent conflicts of interest, ensure transparency, and manage the inherent risks associated with such lending practices.
Key Decision
This amendment introduces several significant changes and clarifications for NBFCs:
- New Definitions: Detailed definitions have been added for critical terms such as 'Related Party', 'Related Person', 'Key Managerial Personnel (KMP)', and 'Specified Employees', often aligning with definitions from the Companies Act, 2013, and Insolvency and Bankruptcy Code (IBC), 2016.
- Applicability Clarification: Specific paragraphs related to 'Credit Risk Evaluation' (Paragraphs 6-8) are now exclusively applicable to 'Notified NBFCs'.
- Mandatory Credit Policy Provisions: NBFCs must incorporate specific provisions within their credit policies for 'lending to related parties'. These provisions must include additional safeguards, aggregate limits for loans to related parties, sub-limits for individual/group related parties, and a whistleblowing mechanism for reporting irregular loans.
- Materiality Thresholds for Loans: The circular introduces specific monetary limits for loans (including personal loans to Directors or KMP) to related parties, based on the NBFC's layer:
- Upper Layer and Top Layer NBFCs: ₹10 crore
- Middle Layer NBFCs: ₹5 crore
- Base Layer NBFCs: ₹1 crore Loans exceeding these thresholds must be sanctioned by the NBFC's Board or a Committee of the Board (excluding the Audit Committee).
- Recusal from Decisions: Directors, KMPs, and Specified Employees are now mandated to recuse themselves from any deliberations or decisions involving loan proposals or arrangements where they or their related parties are involved.
- Enhanced Monitoring: NBFCs are required to maintain an updated list of related persons and parties, and the loans sanctioned to them. Loans to 'specified employees' and their relatives must be reported to the Board annually. Internal auditors must conduct periodic reviews (quarterly or shorter intervals) to ensure adherence to guidelines, and any deviations must be reported to the Audit Committee or Board.
- Anti-Circumvention Clause: Any arrangement or structure used to bypass these directions, such as reciprocal lending or quid pro quo arrangements, will be treated as related party lending.
- Effective Date: The amendments will come into force from April 1, 2026. However, existing related party transactions not in conformity can run off until maturity but cannot be renewed or enhanced without compliance with the new rules.
Exam Relevance
- Materiality Thresholds: ₹10 Cr (Upper/Top Layer), ₹5 Cr (Middle Layer), ₹1 Cr (Base Layer). Exam Insight: These layer-wise numeric limits are extremely high-yield for objective questions.
- Sanctioning Authority: Board or Committee (excluding Audit Committee). Exam Insight: "Excluding Audit Committee" is a trap option in multiple-choice questions.
- Recusal: KMP/Directors must recuse from related decisions. Exam Insight: Corporate governance concept.
- Effective Date: April 1, 2026.
Summary Table
| Feature | Details |
|---|---|
| Circular Title | Reserve Bank of India (Non-Banking Financial Companies – Credit Risk Management) – Amendment Directions, 2026 |
| Issuance Date | January 05, 2026 |
| Effective Date | April 01, 2026 |
| Amends | RBI (Non-Banking Financial Companies - Credit Risk Management) Directions, 2025 |
| Key Focus | Strengthening governance and risk management related to 'Lending to Related Parties' by NBFCs. |
| Materiality Thresholds (Related Party Loans) | Upper Layer & Top Layer NBFCs: ₹10 crore Middle Layer NBFCs: ₹5 crore Base Layer NBFCs: ₹1 crore |
| Sanctioning Authority (Above Threshold) | Board of NBFC or a Committee of the Board (excluding Audit Committee) |
| Monitoring Frequency | Internal auditors to conduct periodic reviews at quarterly or shorter intervals. |
| Recusal Mandate | Directors, KMP, Specified employees must recuse from decisions on loans/arrangements involving themselves or related parties. |
| Key Definitions Added | Related Party, Related Person, KMP, Specified employees, Committee on lending to related parties, Lending (context of related party). |
| Exclusions (Related Party) | Government-owned/controlled entities not treated as related parties to a government-owned NBFC due to common ownership/control. Professional advice is not "direction". |
| Existing Loans | Can run-off till maturity, but no renewal/review/enhancement without compliance with new amendments. |
RBI/2025-2026/177DOR.CRE.REC.378/07-02-005/2025-26 - Reserve Bank of India (Urban Co-operative Banks – Credit Risk Management) – Amendment Directions, 2026
Background
This RBI circular, dated January 05, 2026, introduces amendments to the existing Reserve Bank of India (Urban Co-operative Banks – Credit Risk Management) Directions, 2025. Issued under the authority of Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, these amendments aim to refine and strengthen the credit risk management framework for Urban Co-operative Banks (UCBs).
Key Decision
The circular makes several crucial changes, primarily focusing on definitions, board policies, statutory restrictions, and regulatory restrictions related to credit risk management and lending to related parties within UCBs:
- New Definitions: Introduces a comprehensive set of new definitions for key terms like 'Contract or arrangement', 'Control', 'Director of a UCB', 'Entity', 'Key Managerial Personnel (KMP)', 'Lending' (in the context of related parties), 'Person', 'Personal Loan', 'Promoter', 'Reciprocally Related Person', 'Related Party', 'Related Person', and 'Specified employees'. The definition of 'Relative' is also updated.
- Board Approved Policies: Mandates UCBs to implement a comprehensive Board-approved policy on Credit Risk Management. This policy must specifically cover lending to related parties, property valuation (including valuer empanelment), and the review/renewal of credit facilities. It also emphasizes whistleblowing mechanisms for irregular loans.
- Statutory Restrictions Clarified: Provides detailed clarifications on the applicability of Section 20(1)(b) of the Banking Regulation Act, 1949, which prohibits banks from granting loans or advances to their directors or entities where directors have specific interests. It also lists specific exceptions where these prohibitions would not apply, such as pre-appointment advances, loans against certain securities (Government securities, LIC, FDs up to 100% LTV), regular employee loans, and fully cash-collateralized Non-Fund Based (NFB) facilities.
- Regulatory Restrictions on Related Party Lending: Deletes previous sections and introduces new general principles for lending to related parties. These principles require Board oversight, specific policy provisions, and aggregate/sub-limits within existing prudential exposure norms.
- Prohibitions for Tier I, II, III UCBs: Specifically prohibits Tier I, II, and III UCBs from undertaking any lending transactions with relatives of directors or firms/companies where directors' relatives have an interest, act as guarantors, or have substantial control. Exceptions exist for credit facilities fully secured by government securities, life insurance policies, or fixed deposits.
- Materiality Thresholds: Establishes materiality thresholds for related party loans (not prohibited and not fully secured by cash/liquid securities) above which Board sanction is mandatory:
- Tier 1 UCBs: ₹10 Lakh
- Tier 2 UCBs: ₹25 Lakh
- Tier 3 UCBs: ₹75 Lakh
- Tier 4 UCBs: ₹1 Crore
- Recusal of Interested Parties: Mandates that directors, KMP, or specified employees must recuse themselves from deliberations and decisions on loan proposals or contracts involving themselves or their related parties.
Exam Relevance
- Materiality Thresholds: ₹10 Lakh (Tier 1), ₹25 Lakh (Tier 2), ₹75 Lakh (Tier 3), ₹1 Crore (Tier 4). Exam Insight: Tier-wise limits are tougher to memorize but critical for specialist officer exams.
- Prohibitions: Tier 1-3 prohibited from lending to relatives/director-related firms. Exam Insight: Note that Tier 4 is excluded from this specific prohibition.
- Section 20(1)(b): Statutory prohibition on loans to directors. Exam Insight: A foundational section of the Banking Regulation Act.
Summary Table
| Feature | Details |
|---|---|
| Circular Title | Reserve Bank of India (Urban Co-operative Banks – Credit Risk Management) – Amendment Directions, 2026 |
| Issued By | Reserve Bank of India (RBI) |
| Date Issued | January 05, 2026 |
| Applicability | Urban Co-operative Banks (UCBs) |
| Legal Basis | Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949 |
| Key Focus | Amends credit risk management directions, new definitions, related party lending, statutory & regulatory restrictions. |
| Materiality Thresholds (Non-Prohibited, Unsecured Loans) | Tier 1: ₹10 Lakh; Tier 2: ₹25 Lakh; Tier 3: ₹75 Lakh; Tier 4: ₹1 Crore |
| Prohibitions | Tier I, II, III UCBs prohibited from lending to relatives of directors/related firms (with exceptions) |
| Board Role | Overall responsibility for policy, sanctioning material loans, ensuring recusal. |
RBI/2025-2026/173DOR.CRE.REC.374/07-02-001/2025-26: Commercial Banks – Credit Risk Management Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its regulatory framework to ensure sound banking practices. This circular introduces amendments to the existing "Reserve Bank of India (Commercial Banks - Credit Risk Management) Directions, 2025". These amendments are crucial for strengthening the credit risk management framework for commercial banks, especially concerning lending to 'related parties', to enhance transparency and mitigate potential conflicts of interest. The changes are enacted under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949.
Key Decision
The RBI has significantly revamped various aspects of credit risk management, with a strong focus on "Lending to Related Parties". The key decisions include:
- Expanded and Clarified Definitions: Several new and revised definitions have been introduced, such as ‘Committee on lending to related parties’, ‘Reciprocally Related Person’, ‘Related Party’, ‘Related Person’, ‘Lending’ in the context of related parties, ‘Key Managerial Personnel (KMP)’, and ‘Specified employees’. These definitions align with the Companies Act, 2013, and the Insolvency and Bankruptcy Code (IBC), 2016, where applicable.
- Board Policy Enhancement: The Board-approved policy on Credit Risk Management must now comprehensively cover aspects related to lending to related parties, alongside other areas like country risk management and unhedged foreign currency exposures.
- Revised Statutory Restrictions (Section 20 of BR Act): Paragraphs related to statutory restrictions on loans and advances to directors and companies where directors are interested have been updated. Specific exceptions to these restrictions are now clearly defined, such as loans granted prior to a director's appointment, loans against certain liquid securities, and personal loans meeting specific criteria.
- New Regulatory Framework for Related Party Lending: Previous sections on regulatory restrictions have been deleted and replaced with a new, detailed framework (Section B.1: Lending to Related Parties). This new framework outlines general principles, regulatory prohibitions, and materiality thresholds.
- Prohibitions: Banks are prohibited from having any exposure (including investments) to their promoters and their relatives, shareholders with 10% or more paid-up equity, and entities where they have significant influence or control, with specific provisos for non-strategic investments by financial institutions.
- Materiality Threshold: A materiality threshold has been introduced for non-prohibited related party loans, with specific ceilings based on the bank's asset size (e.g., ₹25 crore for banks with asset size > ₹10,00,000 crore).
Exam Relevance
- Prohibitions: No exposure to promoters/relatives/subsidiaries. Exam Insight: Contrast this with permitted "personal loans" to directors (under policy).
- Materiality: ₹25 Crore for large banks (Assets > ₹10 Lakh Cr). Exam Insight: A benchmark number for "large" banks.
- Committee: New Committee on lending to related parties. Exam Insight: It's a Board level committee, specifically excluding the Audit Committee for sanctioning power.
- Section 20 Exceptions: Loans against Govt Securities/LIC/FD (100% margin) are permitted.
Summary Table
| Aspect | Details / Key Provision |
|---|---|
| Circular Title | RBI/2025-2026/173DOR.CRE.REC.374/07-02-001/2025-26 |
| Issuing Authority | Reserve Bank of India (RBI) |
| Date of Issue | January 05, 2026 |
| Enabling Sections (BR Act, 1949) | Sections 21 and 35A |
| Amends | RBI (Commercial Banks - Credit Risk Management) Directions, 2025 |
| Key Focus Area | Lending to Related Parties, Credit Risk Management |
| New Committee Defined | ‘Committee on lending to related parties’ (Board Committee, not Audit Committee) |
| 'Related Person' to Bank Threshold | Owns >5% of paid-up equity or voting rights of the bank |
| 'Related Party' Entity Threshold | Shareholder with >10% of paid-up equity; Controls >20% voting rights |
| Prohibited Exposures (42H) | To Promoters/relatives, shareholders with ≥10% equity, entities under their influence/control (exceptions exist for non-strategic FIs/SCBs/FPIs/MFs) |
| Materiality Threshold (Loan to RP) | For banks with Asset Size > ₹10,00,000 crore: ₹25 crore |
| Personal Loans to Director (Exception) | Permitted as per employee policy / compensation, interest rate not lower than employees', not for investment in financial assets |
| NFB to Director/Related Party (Exception) | Fully secured by cash collateral (except derivative transactions) |
Returns – Department of Payment and Settlement Systems – Submission in CIMS
Background
The Reserve Bank of India (RBI) is continuously upgrading its systems to improve data collection and management. To this end, RBI has launched its next-generation data warehouse called the Centralised Information Management System (CIMS). This circular officially announces the commencement of reporting for specific returns by Prepaid Payment Instrument (PPI) Issuers through this new CIMS portal. This is a significant step towards modernizing RBI's data infrastructure and streamlining reporting processes.
Key Decision
Effective January 01, 2026, all Prepaid Payment Instrument (PPI) Issuers are mandated to submit two key returns through the new CIMS portal (https://cims.rbi.org.in/#/login) instead of previous methods:
- PPI Statistics (Return Code: R100): This is a monthly return, required for reporting periods starting from December 2025 onwards. The deadline for submission is the 7th of the succeeding month.
- PPI Customer Grievances (Return Code: R360): This is a quarterly return, required for reporting quarters starting from December 2025 onwards. The deadline for submission is the 10th of the succeeding month.
Admin users for each reporting entity have already been created in CIMS, and they are responsible for creating login credentials for the users who will submit these returns. Non-compliance with these instructions will lead to penal action under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007.
Exam Relevance
- System: CIMS (Centralised Information Management System). Exam Insight: The full form and purpose (Data Warehouse) are frequently asked.
- Returns: R100 (Monthly) and R360 (Quarterly). Exam Insight: Match the Return Code to the Subject (R100=Stats, R360=Grievances).
- Return Frequency: Monthly (by 7th) and Quarterly (by 10th). Exam Insight: Confusion between 7th and 10th is a common trap.
Summary Table
| Feature | Details |
|---|---|
| Circular Date | January 01, 2026 |
| Issued To | All Prepaid Payment Instrument (PPI) Issuers |
| Core Change | Submission of specific returns to CIMS portal |
| New System Name | Centralised Information Management System (CIMS) |
| CIMS Purpose | RBI's next-generation data warehouse |
| Monthly Return | PPI Statistics (R100) |
| Quarterly Return | PPI Customer Grievances (R360) |
| Reporting Start Date | December 2025 (Monthly & Quarterly) |
| Monthly Deadline | By 7th of the succeeding month |
| Quarterly Deadline | By 10th of the succeeding month |
| Legal Basis | Section 12 read with Section 19 of PSS Act, 2007 |
RBI Circular: Returns – Department of Payment and Settlement Systems – Submission in CIMS
Background
The Reserve Bank of India (RBI) has launched its next-generation data warehouse, the Centralised Information Management System (CIMS). This system aims to streamline and centralize data submission processes from various financial entities. To leverage CIMS effectively, the RBI is progressively migrating different types of data reporting to this new platform.
Key Decision
In line with the CIMS rollout, the RBI has mandated All White Label ATM (WLA) Operators to start submitting the 'WLA Statistics' return (Return Code: R330) on a monthly basis through the CIMS portal. This reporting requirement is effective for data pertaining to December 2025 onwards. The deadline for submission is the 7th of the succeeding month (e.g., December 2025 data by January 07, 2026). Non-compliance will attract penal action under the Payment and Settlement Systems Act, 2007.
Exam Relevance
For banking exams like IBPS AFO, NABARD, and SBI, understanding RBI's data management systems and reporting requirements is crucial. Key points to remember are:
- CIMS: Centralised Information Management System, RBI's new data warehouse.
- White Label ATM Operators: Their role and regulatory compliance.
- Specific Return: 'WLA Statistics' (R330).
- Frequency: Monthly.
- Reporting Deadline: 7th of the succeeding month.
- Legal Framework: Payment and Settlement Systems Act, 2007 (Sections 12 and 19). Questions may test your knowledge on the full form of CIMS, entities required to report, the name/code of the return, its frequency, and the associated legal act.
Summary Table
| Aspect | Details |
|---|---|
| Circular No. | RBI/2025-26/171 CO.DPSS.ODD.No.S1073/06-08-024/2025-2026 |
| Date of Issue | January 01, 2026 |
| Issued To | All White Label ATM Operators |
| Subject | Returns – Department of Payment and Settlement Systems – Submission in CIMS |
| New Reporting System | Centralised Information Management System (CIMS) |
| Return Name | WLA Statistics |
| Return Code | R330 |
| Reporting Frequency | Monthly |
| Reporting Period Starts | December 2025 onwards |
| Submission Due Date | By 7th of the succeeding month (e.g., Dec 2025 data by Jan 07, 2026) |
| Enabling Act | Payment and Settlement Systems Act, 2007 (Sections 12 read with 19) |
RBI Circular: Returns – Department of Payment and Settlement Systems – Submission in CIMS
Background
The Reserve Bank of India (RBI) has launched its next-generation data warehouse, known as the Centralised Information Management System (CIMS). This new system is designed to streamline and centralize various data reporting requirements from regulated entities. This circular outlines the directive for specific entities to transition their reporting to this new platform.
Key Decision
This circular mandates All MTSS (Money Transfer Service Scheme) Overseas Principals to commence submitting their "MTSS Business" return, identified by Return Code R103, directly through the new CIMS portal (https://cims.rbi.org.in/#/login). The reporting is required on a monthly basis, starting with the data for December 2025 onwards. Entities are required to submit the return by the 7th of the succeeding month (e.g., the return for December 2025 must be submitted by January 07, 2026). Admin Users of each reporting entity are responsible for creating the necessary login credentials for the users who will submit these returns. Non-compliance will lead to penal action under the Payment and Settlement Systems Act, 2007.
Exam Relevance
- System: CIMS (Centralised Information Management System). Exam Insight: Know that this is the new data reporting platform replacing legacy systems.
- Return Code: R103 (MTSS Business). Exam Insight: Specific return codes are often asked in objective exams.
- Frequency: Monthly (by 7th). Exam Insight: Monthly frequency, not quarterly.
Summary Table
| Feature | Details |
|---|---|
| Circular ID | RBI/2025-2026/170CO.DPSS.ODD.No.S1072/06-08-024/2025-2026 |
| Date of Issue | January 01, 2026 |
| Issued By | Department of Payment and Settlement Systems (DPSS) |
| Addressed To | All MTSS Overseas Principals |
| Key System | Centralised Information Management System (CIMS) |
| Return Name | MTSS Business |
| Return Code | R103 |
| Frequency | Monthly |
| Reporting Start | December 2025 onwards |
| Submission Deadline | 7th of the succeeding month (e.g., Dec 2025 by Jan 07, 2026) |
| Legal Basis | Payment and Settlement Systems Act, 2007 (Sec 12 & 19) |
Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026
Background The Reserve Bank of India (RBI) had previously issued comprehensive guidelines for Non-Banking Financial Companies (NBFCs) concerning Concentration Risk Management in 2025. These guidelines, known as the 'Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Directions, 2025', were designed to ensure that NBFCs manage their exposure to single borrowers or groups of borrowers prudently, thereby reducing potential risks. However, based on a review, the RBI found it necessary and expedient in the public interest to introduce amendments to these directions to provide more clarity and specific criteria, especially regarding infrastructure lending.
Key Decision This amendment introduces a crucial proviso to sub-paragraph 4(4) of the existing Directions. This proviso establishes clear and stringent criteria for classifying certain infrastructure lending as 'high-quality infrastructure projects'. This classification is significant as it provides a framework for NBFCs to identify projects with enhanced safeguards, potentially impacting how these exposures are treated under concentration risk management norms.
To be classified as a 'high-quality infrastructure project', an infrastructure lending must meet all the following conditions:
- The project must have completed at least one year of successful operations after achieving its Commercial Operations Date (COD), without any significant breaches of material loan covenants stipulated by the lenders.
- The lending exposure must currently be classified as 'standard' in the books of the NBFC (lender).
- The borrower's revenue stream must be securely tied to rights granted under a concession or contract by a reliable government or public entity (Central Government, a State Government, a public sector entity, or a statutory or regulatory body). Crucially, the contractual provisions must protect these rights for the entire concession/contract period, as long as the borrower fulfils its obligations.
- The contractual agreements must offer a high degree of protection for lenders. This shall, at a minimum, include:
- Provisions for an escrow / Trust and Retention Account (TRA) mechanism for ring-fencing the project's cash flows.
- A pari-passu charge (equal footing) in favour of the lender over all movable and immovable assets of the project.
- Clear mitigation of risk for lenders in case of early termination of the project (e.g., 'step-in rights' for lenders, minimum termination payments).
- The borrower must demonstrate sufficient internal or external financial arrangements to meet both current and future working capital needs and other funding requirements of the project, as assessed by the lender.
- The borrower must be restricted from taking actions to the detriment of the lender, such as issuing additional debt against the project's assets or further encumbering its cash flows and assets without the explicit consent of the existing lenders.
Exam Relevance (IBPS AFO, NABARD, SBI)
- New Definition: High-Quality Infrastructure Projects. Exam Insight: This classification allows for lower risk weights in Capital Adequacy norms.
- Criteria: 1 year commercial operations, Standard Asset, Revenue from Govt/Public, Escrow/TRA mechanism. Exam Insight: Memorize the "1 year" post-COD condition and "Standard" status requirement.
- Lender Protection: Pari-passu charge and Step-in rights. Exam Insight: Technical project finance terms.
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026 |
| Circular ID | RBI/2025-26/169 DOR.CRE.REC.372/07-03-008/2025-26 |
| Date of Issue | January 1, 2026 |
| Main Change | Insertion of a proviso to sub-paragraph 4(4) defining 'high-quality infrastructure projects' for NBFCs' concentration risk management. |
| Key Concept | Classification of infrastructure lending based on specific criteria to enhance risk management and potentially impact prudential norms. |
| Applicability Date | From April 1, 2026, or when the NBFC implements the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026, whichever is earlier. |
| Key Criteria Highlights | Project operational for ≥ 1 year post COD; exposure as 'standard' asset; revenue from Govt/PSE/Statutory bodies; mandatory escrow/TRA and pari-passu charge; step-in rights for lenders. |
RBI/2025-2026/168DOR.CRE.REC.373/21-01-002/2025-26: Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) regularly reviews and updates its regulatory framework for financial institutions. This circular, issued on January 1, 2026, specifically amends the existing Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025. The core purpose is to refine how Non-Banking Financial Companies (NBFCs) calculate risk weights for certain types of loans, particularly those extended to 'High-quality infrastructure projects'. This ensures capital adequacy norms remain robust and reflective of actual risk.
Key Decision
The RBI has introduced differentiated risk weights for NBFCs' loans to 'High-quality infrastructure projects' based on the borrower's repayment performance. This aims to incentivize timely repayments and provide regulatory relief for well-performing assets.
-
Reduced Risk Weights:
- For loans to 'High-quality infrastructure projects' (as defined in the RBI (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026) where the borrower has repaid at least 2 per cent of the sanctioned project debt, the risk weight is reduced to 75%.
- For loans to 'High-quality infrastructure projects' where the borrower has repaid at least 5 per cent of the sanctioned project debt, the risk weight is further reduced to 50%.
-
Important Provisos:
- If a project initially classified as 'High-quality' subsequently fails to meet the specified conditions, it will revert to higher risk weights as prescribed in other parts of the table (Sr. no.3(e) or (g)).
- The repayment threshold (2% or 5%) must be determined based on the sanctioned project debt. Any additional debt sanctioned later (e.g., during a loan takeover) must be clubbed with previous loans to calculate this threshold.
-
Applicability & Transition:
- These Amendment Directions are applicable from April 1, 2026, or earlier if an NBFC adopts them in their entirety.
- For existing exposures that would attract a higher risk weight under these new directions compared to extant guidelines, NBFCs are allowed to continue maintaining the old (extant) risk weights until the next review/renewal of the loan or March 31, 2027, whichever comes first.
Exam Relevance (IBPS AFO, NABARD, SBI)
- Incentive Structure: Lower Risk Weights for repayment performance. Exam Insight: A unique "performance-based" regulatory relief.
- Specifics: 2% repayment = 75% RW; 5% repayment = 50% RW. Exam Insight: These number pairs (2%-75%, 5%-50%) are definitve exam questions.
- Definition Link: Relies on "High-Quality Infrastructure Project" definition from Concentration Risk circular.
- Dates: Effective April 1, 2026; Transition till March 31, 2027.
Summary Table
| On-balance Sheet item | Percentage Weight (Risk Weight) |
|---|---|
| Loans to 'High-quality infrastructure projects' (as defined in RBI (NBFC - Concentration Risk Management) Amendment Directions, 2026) where the borrower has repaid at least 2% of the sanctioned project debt. | 75% |
| Loans to 'High-quality infrastructure projects' (as defined in RBI (NBFC - Concentration Risk Management) Amendment Directions, 2026) where the borrower has repaid at least 5% of the sanctioned project debt. | 50% |
| Conditions: Projects failing 'High-quality' criteria subsequently revert to higher risk weights. Repayment threshold is based on total sanctioned project debt, including additional clubbed debt. | |
| Effective Date: April 1, 2026 | |
| Transition Period (for existing exposures attracting higher new risk weights): Extant risk weights can be maintained until next review/renewal or March 31, 2027, whichever is earlier. |
Forced ID 13243 - RBI (Commercial Banks - Financial Statements: Presentation and Disclosures) Amendment Directions, 2026
Background
This RBI circular, dated January 1, 2026, amends the existing Reserve Bank of India (Commercial Banks - Financial Statements: Presentation and Disclosures) Directions, 2025. The need for this amendment arose from a review following the issuance of the Reserve Bank of India (Commercial Banks – Concentration Risk Management) Amendment Directions, 2025. The RBI, exercising its powers under Sections 21 and 35A of the Banking Regulation Act, 1949, deemed it necessary in the public interest to modify disclosure requirements for commercial banks.
Key Decision
The core decision of this amendment is to introduce a specific disclosure requirement for Banks incorporated outside India. These banks must now explicitly disclose, by way of a note in Schedule 1: Capital to their Balance Sheet, any amount held as a deposit under Section 11(2)(b)(i) of the Banking Regulation Act, 1949, that has been earmarked or designated as Credit Risk Mitigation (CRM). This CRM is intended for offsetting non-centrally cleared derivative exposures to their Head Office (including overseas branches of the Head Office).
Crucially, the circular clarifies that this amount, earmarked for CRM, shall not be reckoned for regulatory capital and any other statutory requirements, if any. This enhances transparency regarding how certain deposits held by foreign banks are treated for capital adequacy purposes.
Before vs. After Comparison
Before (Prior to Amendment):
- General disclosure requirements for capital for banks incorporated outside India existed under Schedule 1.
- There was no explicit, mandated note detailing the earmarking of specific deposits under Section 11(2)(b)(i) of the BR Act for Credit Risk Mitigation (CRM) against derivative exposures.
- The exclusion of such earmarked amounts from regulatory capital was not explicitly required to be disclosed in this specific manner in the financial statements.
After (Post-Amendment):
- Banks incorporated outside India are now required to provide a specific note in Schedule 1: Capital of their Balance Sheet.
- This note must disclose the amount from Section 11(2) of the BR Act that has been earmarked as Credit Risk Mitigation (CRM) for non-centrally cleared derivative exposures to their Head Office.
- The note must clearly state that this CRM-earmarked amount is NOT reckoned for regulatory capital and other statutory requirements.
Exam Relevance
- BR Act Section 11(2)(b)(i): This specific section of the Banking Regulation Act, 1949, which governs deposits by foreign banks, is now explicitly linked to a new disclosure requirement for Credit Risk Mitigation (CRM). Exam Insight: Specific statutory sections and their applications, especially concerning foreign banks, are often tested for detailed knowledge.
- Exclusion from Regulatory Capital: Amounts earmarked for CRM from Section 11(2) deposits are explicitly stated as NOT reckoned for regulatory capital. Exam Insight: Understanding what counts as regulatory capital and what is explicitly excluded is a fundamental concept in banking exams and a common area for questions.
- Applicability to Foreign Banks: The amendment primarily introduces a specific disclosure requirement for Banks incorporated outside India. Exam Insight: Identifying the specific entities or types of banks a regulation applies to is crucial for targeted study.
- Effective Date: The amendment comes into force from the date a bank decides to implement paragraphs 3(1) to 3(4) of the Reserve Bank of India (Commercial Banks - Concentration Risk Management) Amendment Directions, 2025, or from April 1, 2026, whichever is earlier. Exam Insight: Effective dates for new regulations are high-yield questions, often requiring knowledge of both direct and linked implementation triggers.
Summary Table
| Feature | Details |
|---|---|
| Circular Number | RBI/2025-26/167 DOR.CRE.REC.371/21.04.018/2025-26 |
| Date | January 1, 2026 |
| Applicability | Primarily Banks incorporated outside India |
| Key Change | Mandates explicit disclosure in Schedule 1: Capital of Balance Sheet for amounts earmarked as Credit Risk Mitigation (CRM) from Section 11(2)(b)(i) BR Act deposits, specifically for non-centrally cleared derivative exposures to Head Office. |
| Capital Impact | Such CRM-earmarked amounts are NOT reckoned for regulatory capital and other statutory requirements. |
| Effective Date | Earlier of: implementation date of Concentration Risk Management Directions, 2025, or April 1, 2026. |
Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) regularly reviews and updates its regulatory framework for Non-Banking Financial Companies (NBFCs). Previously, the RBI had issued the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025. This current circular, dated January 1, 2026, is an amendment to those earlier directions. It focuses specifically on the capital adequacy norms, particularly regarding risk weights assigned to loans given by NBFCs for infrastructure projects. The amendment aims to refine the risk assessment for certain high-quality infrastructure financing.
Key Decision
This amendment revises the risk weights for loans extended by NBFCs to 'High-quality infrastructure projects'. The key changes are designed to provide a more nuanced risk assessment based on the repayment progress of the project debt.
- Reduced Risk Weight for Repaid Debt (2%): For loans to 'High-quality infrastructure projects' where the borrower has already repaid at least 2% of the sanctioned project debt, the risk weight has been set at 75%.
- Further Reduced Risk Weight for Repaid Debt (5%): For loans to 'High-quality infrastructure projects' where the borrower has repaid at least 5% of the sanctioned project debt, the risk weight has been set at 50%. These projects must meet the definition of 'High-quality infrastructure projects' as specified in a separate RBI circular (Concentration Risk Management Amendment Directions, 2026). If a project later fails to meet these 'high-quality' conditions, higher risk weights will apply. The repayment threshold calculation must include any additional debt sanctioned as part of a takeover or otherwise, clubbing it with previous loans for the project.
The amendment directions will be applicable from April 1, 2026, or earlier if an NBFC adopts them completely. A transitional provision allows NBFCs to continue with extant (existing) lower risk weights until March 31, 2027, or the next review/renewal, whichever is earlier, for exposures that might attract higher risk weights under these new rules.
Exam Relevance
- Circular Date & Number: The circular is dated January 1, 2026, with circular number RBI/2025-26/168 DOR.CRE.REC.373/21-01-002/2025-26. Why it matters for exam: Always note the official circular number and date for context; questions may use these identifiers.
- Applicability: These directions are applicable to Non-Banking Financial Companies (NBFCs). Why it matters for exam: Identifying the regulated entity is crucial.
- Effective Date: The changes are effective from April 1, 2026. Why it matters for exam: Key effective dates are frequently tested for compliance knowledge.
- Risk Weight Thresholds (2% Repayment): Loans to 'High-quality infrastructure projects' with at least 2% repayment of sanctioned debt now have a 75% risk weight. Why it matters for exam: Questions often focus on specific percentage thresholds and their associated risk weights.
- Risk Weight Thresholds (5% Repayment): Loans to 'High-quality infrastructure projects' with at least 5% repayment of sanctioned debt now have a 50% risk weight. Why it matters for exam: Differentiating between the repayment tiers and their corresponding risk weights is a common question pattern.
- Definition of High-Quality Infrastructure Projects: The definition is referenced from the Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026. Why it matters for exam: The interlinking of circulars and definitions is important for a holistic understanding of regulations.
- Transition Period: A grace period until March 31, 2027, or next review/renewal (whichever is earlier) is provided for existing exposures that may attract higher risk weights. Why it matters for exam: Transition periods and their deadlines are important for assessing implementation timelines.
Summary Table
| Sr. No. | On-balance Sheet items (Loans to 'High-quality infrastructure projects') | Percentage Weight |
|---|---|---|
| (e) (i) | Where the borrower has repaid at least 2% of the sanctioned project debt | 75% |
| (e) (ii) | Where the borrower has repaid at least 5% of the sanctioned project debt | 50% |
Note: The project must continue to meet the definition of 'High-quality infrastructure projects' and the repayment threshold is based on the sanctioned project debt, including any additional debt.
Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) had previously issued the Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Directions, 2025. These directions were put in place to manage the risks associated with NBFCs having large exposures to single borrowers or groups of connected borrowers. On a review, the RBI found it necessary to amend these directions to provide more clarity and specific criteria, especially concerning infrastructure lending. This amendment aims to refine the risk management framework by defining what constitutes a 'high-quality infrastructure project'.
Key Decision
The RBI has issued amendment directions that modify the existing Concentration Risk Management Directions for NBFCs. The most significant change is the insertion of a new proviso to sub-paragraph 4(4) of the Directions. This proviso lays down specific criteria for classifying infrastructure lending to projects as 'high-quality infrastructure projects'.
For an infrastructure project to be classified as 'high-quality', it must meet all the following conditions:
- The project must have successfully completed at least one year of operations after achieving the date of completion of commercial operations, without any breach of material covenants stipulated by the lenders.
- The exposure to the project must be classified as 'standard' in the books of the lending NBFC.
- The borrower's revenue must be dependent on rights granted under a concession or contract by the Central Government, a State Government, a public sector entity, or a statutory or regulatory body. Crucially, the contractual provisions must protect these rights for the entire period of the concession/contract, provided the borrower fulfills its obligations.
- The concession or contractual provisions must offer a high degree of protection for a lender. This minimum protection must include:
- An escrow / Trust and Retention Account (TRA) mechanism to ring-fence cash flows.
- A pari-passu charge in favour of the lender over all movable and immovable assets of the project.
- Mechanisms to mitigate risk for lenders in case of early termination, such as step-in rights for lenders or minimum termination payments.
- The borrower must demonstrate sufficient internal or external financial arrangements to cover current and future working capital and other funding requirements of the project, as assessed by the lender.
- The borrower must be restricted from actions detrimental to the lender, such as issuing additional debt against or further encumbering the project's cash flows and assets without the existing lenders' consent.
These Amendment Directions will become applicable either when an NBFC decides to implement the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026, or from April 1, 2026, whichever date is earlier.
Exam Relevance
- Circular Name & Date: The full title, Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026, and the effective date of January 1, 2026 (date of issue) or April 1, 2026 (date of applicability) are important. Why it matters: Questions can test the exact title or applicability date of a new regulation.
- Applicability to Entities: These directions specifically apply to Non-Banking Financial Companies (NBFCs). Why it matters: Identifying the regulated entity is crucial for distinguishing different circulars.
- Definition of 'High-Quality Infrastructure Projects': The detailed criteria for classifying such projects is a key focus. Why it matters: Expect questions asking to identify specific criteria or which criteria must not be met for a project to be classified as high-quality.
- Operational Requirement: A project must have completed at least one year of operations post commercial operations date. Why it matters: Specific timeframes like this are frequently tested in banking exams.
- Lender Protection Mechanisms: The requirement for escrow/Trust and Retention Account (TRA), pari-passu charge, and early termination risk mitigation (like step-in rights) are critical. Why it matters: These are specific financial and legal terms that a question setter might include in multiple-choice options.
- Effective Date: The applicability from April 1, 2026 (or earlier implementation by NBFCs) is a definite point for examination. Why it matters: Effective/applicability dates are common questions, especially for new or amended regulations.
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026 |
| Issued On | January 1, 2026 |
| Applicable To | All Non-Banking Financial Companies (NBFCs) |
| Key Change | Introduction of criteria for classifying 'high-quality infrastructure projects' for lending purposes. |
| Operational History | Project must have one year of operations post commercial operations date, without material covenant breach. |
| Asset Classification | Exposure must be classified as 'standard' by the lender. |
| Revenue Source | Based on rights from Central/State Govt., PSU, or statutory/regulatory body with contractual protection. |
| Lender Protection | Must include Escrow/TRA, pari-passu charge, and early termination risk mitigation (e.g., step-in rights). |
| Financial Arrangements | Borrower must have sufficient working capital and funding arrangements. |
| Borrower Restrictions | Restricted from actions detrimental to lender (e.g., additional debt/encumbrance without consent). |
| Applicability Date | From April 1, 2026, or earlier if NBFCs implement related Prudential Norms Amendment Directions, 2026. |
Forced ID 13246: Returns – Department of Payment and Settlement Systems – Submission in CIMS
Background
The Reserve Bank of India (RBI) is continuously upgrading its data infrastructure to enhance efficiency and accuracy in regulatory reporting. As part of this, RBI launched its next-generation data warehouse, known as the Centralised Information Management System (CIMS). This system aims to streamline the submission and management of various returns from regulated entities.
Key Decision
The RBI has decided to commence the reporting of specific returns through the newly launched CIMS portal. Effective for the reporting period of December 2025 onwards, all "MTSS Business" returns (Return Code R103), which are submitted on a Monthly frequency, must now be filed in CIMS.
Key points of this decision include:
- Return Name: MTSS Business
- Return Code: R103
- Frequency: Monthly
- Reporting Commencement: For the reporting period December 2025 onwards.
- Submission Deadline: As per extant practice, returns for every month should be submitted by the 7th of the succeeding month (e.g., December 2025 return by January 07, 2026).
- Access: Admin Users for each reporting entity have been created in CIMS, and they are responsible for creating login credentials for their respective submitters.
- Legal Basis: This directive is issued under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Non-compliance will lead to penal action.
Exam Relevance
- CIMS – Full Form & Purpose: The Centralised Information Management System (CIMS) is RBI's next-generation data warehouse. Why it matters for exam: Knowing the full form and the primary function of new RBI initiatives or systems is a common question type.
- Specific Return & Details: The specific return, "MTSS Business", with its code R103 and Monthly frequency. Why it matters for exam: Questions often focus on the exact name, code, or frequency of important regulatory returns.
- Reporting Timeline: The reporting period starting from December 2025 and the deadline of the 7th of the succeeding month. Why it matters for exam: Key dates and submission deadlines are frequently tested for accuracy.
- Legal Framework: The circular's legal backing under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Why it matters for exam: Identifying the specific Act and sections under which a circular is issued demonstrates understanding of regulatory powers.
Summary Table
| Category | Detail |
|---|---|
| Circular Number | RBI/2025-26/170 CO.DPSS.ODD.No.S1072/06-08-024/2025-2026 |
| Date Issued | January 01, 2026 |
| Subject | Returns – Department of Payment and Settlement Systems – Submission in CIMS |
| Applicability | All MTSS Overseas Principals |
| New Reporting System | Centralised Information Management System (CIMS) |
| Return Name | MTSS Business |
| Return Code | R103 |
| Reporting Frequency | Monthly |
| Reporting Commences | For reporting period December 2025 onwards |
| Submission Deadline | By the 7th of the succeeding month |
| Legal Provisions | Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007 |
Forced ID 13248: PPI Returns in CIMS
Background
The Reserve Bank of India (RBI) has launched its next-generation data warehouse, known as the Centralised Information Management System (CIMS). This system aims to streamline and improve the efficiency of data collection and management across various banking and payment segments. Following its launch, the RBI is progressively migrating the submission of various regulatory returns to this new platform.
Key Decision
All Prepaid Payment Instrument (PPI) Issuers are now required to submit two crucial returns – PPI Statistics and PPI Customer Grievances – directly through the CIMS portal. This marks a shift from previous reporting mechanisms, emphasizing digital and centralized data submission.
Exam Relevance
- CIMS (Centralised Information Management System): This is the RBI's new data warehouse. Why it matters for exam: Questions often focus on new technological initiatives by the RBI, asking for the full form or purpose of systems like CIMS.
- Affected Entities: The directive specifically targets Prepaid Payment Instrument (PPI) Issuers. Why it matters for exam: Knowing which entities are regulated by specific circulars is important. PPIs are a key part of the digital payments ecosystem.
- Specific Returns and Codes: The two returns are PPI Statistics (R100) and PPI Customer Grievances (R360). Why it matters for exam: Exact names, codes, and frequencies of mandatory returns can be asked in factual questions.
- Reporting Frequency: PPI Statistics is a Monthly return, while PPI Customer Grievances is a Quarterly return. Why it matters for exam: Frequency of reporting is a common detail tested.
- Commencement of Reporting: Submissions on CIMS begin for the reporting period December 2025 onwards. Why it matters for exam: Effective dates are critical for understanding when a new rule applies.
- Submission Deadlines: Monthly returns must be submitted by the 7th of the succeeding month, and Quarterly returns by the 10th of the succeeding month. Why it matters for exam: Specific deadlines are high-yield information points.
- Legal Basis: The circular is issued under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Why it matters for exam: Acts and sections providing regulatory power are frequently tested, especially for specialized roles.
Summary Table
| Return Name | Return Code | Frequency | Reporting Starts |
|---|---|---|---|
| PPI Statistics | R100 | Monthly | December 2025 |
| PPI Customer Grievances | R360 | Quarterly | December 2025 Quarter |
Forced ID 13249: Reserve Bank of India (Commercial Banks – Credit Risk Management) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its guidelines to ensure robust risk management practices within the banking sector. This circular, issued on January 05, 2026, serves as an amendment to the existing Reserve Bank of India (Commercial Banks - Credit Risk Management) Directions, 2025. Its primary objective is to enhance clarity and stringency, particularly concerning lending to related parties and associated definitions, under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949.
Key Decision
The RBI has introduced significant amendments focused on strengthening the framework for credit risk management in commercial banks. The key changes include:
- Expanded Definitions: A comprehensive set of new definitions has been introduced or existing ones updated. These include critical terms like 'Committee on lending to related parties', 'Reciprocally Related Person', 'Related Party', and 'Related Person'. Many definitions refer to the Companies Act, 2013, and the Insolvency and Bankruptcy Code (IBC), 2016, for consistency. Notably, the definition of 'Lending' to related parties explicitly includes debt instruments but excludes equity investments.
- Board Approved Policies: The requirement for a Board-approved policy on Credit Risk Management has been strengthened. This policy must now explicitly cover specific aspects such as lending to related parties, country risk management, unhedged foreign currency exposures, property valuation, and current/CC/OD accounts.
- Statutory Restrictions Clarified: Paragraph 15 of the previous directions has been deleted and a new Paragraph 15A inserted. This new paragraph provides explanations regarding Section 20 of the Banking Regulation Act, 1949, particularly clarifying how foreign bank branches in India must comply with the spirit of the Section regarding directors' interests in firms/companies. It also clarifies that certain credit facilities granted prior to a director's appointment are exempted from the general restrictions.
Exam Relevance
- Circular Details: The circular number RBI/2025-26/173, dated January 05, 2026, identifies the specific amendment. Why it matters for exam: Knowing the latest circular numbers and their issuance dates is a basic expectation for current affairs in banking exams.
- Regulatory Powers: The amendments are issued under Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters for exam: Questions often test the legal framework and specific sections under which RBI issues major directions.
- Committee on Lending to Related Parties: A new term defined as a committee of the Board (excluding the Audit Committee) for sanctioning loans to related parties. Why it matters for exam: This is a new, specific organizational requirement. Questions could ask about its purpose or composition.
- Related Party Definition – Shareholding/Control Thresholds: Key thresholds are:
- Related Party: A related person or reciprocally related person being a shareholder with more than ten per cent of paid-up equity share capital, or controlling more than twenty per cent of voting rights.
- Related Person: Owning more than five per cent of paid-up equity share capital of the bank or exercising more than five per cent of voting rights.
- Why it matters for exam: Specific percentage thresholds are frequently tested in objective questions.
- Lending to Related Parties (Scope): Explicitly includes funded and non-fund-based credit facilities and investments in debt instruments of related parties, while excluding equity investments. Why it matters for exam: Distinguishing what is included vs. excluded in 'lending' to related parties is a prime target for 'true/false' or definition-based questions.
- Board Approved Policies – Mandatory Aspects: The credit risk management policy must now specifically cover lending to related parties, country risk management, unhedged foreign currency exposures, valuation of properties, and opening of current/CC/OD accounts. Why it matters for exam: Understanding the expanded scope of mandatory policies shows a deeper grasp of governance requirements.
- Foreign Bank Lending Restriction (Section 20 BR Act): Foreign bank branches in India are restricted from lending to firms/companies where a director on their Board abroad has an interest. An exemption exists if the advance was granted prior to the director's appointment. Why it matters for exam: This is a specific application of a statutory restriction, highlighting compliance requirements for foreign banks.
Summary Table
| Aspect | Old Provision (Pre-2026 Amendment) | New Provision (Post-2026 Amendment) |
|---|---|---|
| Definitions | Existing definitions for 'Personal Loan', 'Relative'. Lack of specific definitions for 'Related Party', 'Reciprocally Related Person', 'Committee on lending to related parties', etc. | Introduction of detailed definitions for 'Committee on lending to related parties', 'Reciprocally Related Person', 'Related Party', 'Related Person' with specific shareholding (5%, 10%) and voting rights (20%) thresholds. Updated 'Personal Loan' and 'Relative' to reference Companies Act/Harmonised Definitions. Equity investments excluded from 'Lending' to related parties. |
| Board Policy Scope | Comprehensive Credit Risk Management policy required, but without explicit mention of related party lending. | Policy now mandatorily covers specific aspects including lending to related parties, country risk, unhedged foreign currency exposures, property valuation, and current/CC/OD accounts. |
| Statutory Restrictions | Paragraph 15 present. General application of Section 20 BR Act. | Paragraph 15 deleted. New Paragraph 15A inserted, clarifying Section 20 of BR Act, 1949 for foreign bank branches (restriction on lending if director has interest). Exemption for advances granted prior to director's appointment. |
| Issued Under | Directions, 2025. | Amendments to Directions, 2025, issued under Sections 21 and 35A of Banking Regulation Act, 1949. |
Reserve Bank of India (Small Finance Banks – Credit Risk Management) – Amendment Directions, 2026
Background
This circular, issued by the Reserve Bank of India (RBI) on January 05, 2026, references the earlier Reserve Bank of India (Small Finance Banks - Credit Risk Management) Directions, 2025. Acting under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, the RBI has introduced several amendments. The primary objective is to review and enhance credit risk management practices, particularly focusing on 'lending to related parties' within Small Finance Banks (SFBs), ensuring it aligns with public interest and robust governance.
Key Decision
The amendments introduce significant clarifications and modifications across various chapters of the existing directions:
-
Chapter I - Preliminary (Definitions):
- New Definitions: Several crucial terms have been newly defined or clarified. These include Committee on lending to related parties (a Board committee for sanctioning loans to related parties), Contract or arrangement, Control, Director of a bank, Entity (for related party context), Key Managerial Personnel (KMP), Lending (for related parties, including funded/non-funded credit and debt investments but excluding equity), Person, Promoter, Reciprocally Related Person (e.g., a director of another bank or their relative), Related Party (a comprehensive definition based on related persons/reciprocally related persons having significant shareholding, control, voting rights, power to nominate directors, or being a guarantor/trustee), Related Person (e.g., a promoter, director, KMP, or person with more than five per cent shareholding/voting rights in the bank), and Specified employees (up to two levels below the Board).
- Updated Definitions: The definitions for Personal Loan and Relative have been replaced to align with Banking Statistics (Harmonised Definitions) and Section 2(77) of the Companies Act, 2013, respectively.
-
Chapter II – Board Approved Policies:
- The requirement for a comprehensive Board approved policy on Credit Risk Management has been expanded. It must now explicitly cover aspects related to lending to related parties, country risk management, unhedged foreign currency exposures, valuation of properties (including empanelment of valuers), and opening of current and CC/OD accounts.
-
Chapter IV – Statutory Restriction:
- Paragraph 15 has been deleted, and a new paragraph 15A has been inserted. This new paragraph provides explanations regarding the applicability of paragraph 14 (restrictions under Section 20(4) of the Banking Regulation Act, 1949) to SFBs.
- Exemptions to Paragraph 14: The provisions of paragraph 14 (lending restrictions to directors/entities where directors are interested) would not apply in specific cases:
- Credit facilities granted or commitments made by a bank to a company where a director has substantial interest, if granted prior to the director's appointment (however, such facilities cannot be renewed, enhanced, or have terms changed after maturity/renewal date until the directorship is relinquished).
- Advances to a public trust where a trustee is also a director of the lending bank.
- Loans and advances to a director against Government securities or life insurance policies.
Exam Relevance
- Circular Number and Date: The circular is dated January 05, 2026, and carries number RBI/2025-26/174. Exam Insight: Recent circulars and their full identifiers are frequent questions.
- Applicable Entities: These directions are specifically for Small Finance Banks (SFBs). Exam Insight: Knowing the scope of applicability for any regulation is fundamental.
- Statutory Basis: The RBI's authority stems from Sections 21 and 35A of the Banking Regulation Act, 1949. The amendments also clarify aspects of Section 20 of the same act. Exam Insight: Core banking acts and their sections are high-yield topics.
- Key Definitions: Understand the precise definitions of 'Related Party', 'Related Person', and 'Reciprocally Related Person'. Pay attention to the shareholding/voting rights thresholds (e.g., more than ten per cent of paid-up equity for an entity to be a 'Related Party' due to a related person's share, or more than five per cent voting rights for an individual to be a 'Related Person'). Exam Insight: Exact definitions and associated percentages are commonly tested.
- Exclusions from 'Related Party': Note that Government-owned/controlled entities are not treated as related parties to a government-owned bank solely due to common ownership. Exam Insight: Exceptions to rules are often the basis for complex questions.
- Expanded Scope of Board Policies: The requirement for the Credit Risk Management policy to cover new areas like lending to related parties, country risk management, unhedged foreign currency exposures, and valuation of properties. Exam Insight: Questions can target the comprehensive elements required in banks' internal policies.
- Exemptions under Section 20: The new paragraph 15A details specific scenarios where lending restrictions to directors or their related entities do not apply, such as loans granted before a director's appointment, or those secured by Government securities or life insurance policies. Exam Insight: These exemptions are critical for understanding the practical application of banking laws and can be direct questions.
Summary Table
| Feature | Details |
|---|---|
| Circular Number | RBI/2025-26/174 DOR.CRE.REC.375/07-02-002/2025-26 |
| Date | January 05, 2026 |
| Issued By | Reserve Bank of India (RBI) |
| Applicable To | Small Finance Banks (SFBs) |
| Key Changes | New/revised definitions (e.g., 'Related Party', 'Related Person'); Expanded scope for Board's Credit Risk Management policy; Clarifications on Section 20 of BR Act exemptions regarding lending to directors/related entities. |
Reserve Bank of India (Local Area Banks – Credit Risk Management) – Amendment Directions, 2026
Background
This circular, issued on January 05, 2026, by the Reserve Bank of India (RBI), introduces amendments to the existing Reserve Bank of India (Local Area Banks - Credit Risk Management) Directions, 2025. The primary objective is to enhance the framework for credit risk management in Local Area Banks (LABs), especially concerning lending to 'related parties' and directors. These amendments are issued under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, to ensure public interest and regulatory clarity.
Key Decision
The RBI has significantly modified the definitions of various terms related to 'related parties' and 'persons' connected to a bank. Crucially, it has deleted the previous paragraph 8 in Chapter III of the Directions and introduced a new paragraph 8A. This new section provides specific exceptions to the statutory restrictions on loans and advances to directors as outlined in Section 20(4) of the Banking Regulation Act, 1949. Additionally, the scope of the Board Approved Policy on Credit Risk Management has been expanded to explicitly include lending to related parties, unhedged foreign currency exposures, and valuation practices.
Exam Relevance
- Circular Details: The circular number RBI/2025-26/175 and date January 05, 2026 are important for identifying the specific regulation. Exam Insight: Questions often test the latest circular number or effective date for major regulatory changes.
- Applicability: These directions specifically apply to Local Area Banks (LABs). Exam Insight: Knowing the scope of applicability (e.g., all banks, specific bank types) is often tested.
- Key Definitions: New and refined definitions for terms like 'Related Party', 'Reciprocally Related Person', 'Related Person', 'Key Managerial Personnel (KMP)', 'Promoter', and 'Control' are critical. The definition of 'Lending' in the context of related parties explicitly excludes equity investments but includes debt instruments. Exam Insight: Expect direct questions on these definitions, especially the components of 'Related Party' or 'Reciprocally Related Person', or what 'Lending' covers/excludes.
- Board Approved Policies: The updated paragraph 5 mandates that the Credit Risk Management policy must cover lending to related parties, unhedged foreign currency exposures, and valuation of properties (including empanelment of valuers). Exam Insight: This lists key areas banks must now explicitly address in their policies, which can be asked as direct questions.
- Exceptions to Section 20 of BR Act: The new paragraph 8A outlines specific scenarios where credit facilities to directors or related entities are permitted, despite general restrictions. These include:
- Pre-existing credit facilities to a company where a director has substantial interest, granted before their appointment (with conditions on renewal/enhancement).
- Advances to a public trust where a trustee is also a director of the bank.
- Loans to a director against government securities, life insurance policies, or fixed deposits, with an LTV not exceeding 100% of realisable value (or RBI-prescribed LTV).
- Personal loans to a director (excluding investment in financial assets) as permitted to other employees.
- Exam Insight: These exceptions are extremely important. Questions can ask to identify which types of loans to directors are permissible, or the conditions under which they are allowed. Focus on the specific types of security or the nature of the loan.
Summary Table
| Aspect | Previous Regulation (Directions, 2025) | Amended Regulation (Directions, 2026)
Note: The circular refers to 'Directions, 2025' implying that the original set of directions for Local Area Banks (LABs) on Credit Risk Management was issued in 2025. This current circular is an amendment to those directions.
Forced ID 13253: RBI Amends UCB Credit Risk Management Directions
Background
The Reserve Bank of India periodically reviews and updates its regulatory framework for financial institutions to ensure robust risk management practices. This circular, issued on January 05, 2026, amends the existing Reserve Bank of India (Urban Co-operative Banks – Credit Risk Management) Directions, 2025. The primary objective is to enhance clarity, strengthen governance, and refine rules related to credit risk management, particularly concerning lending to related parties in Urban Co-operative Banks (UCBs).
Key Decision
The RBI has introduced significant amendments through these directions. The key decisions include:
- New and Revised Definitions: Several terms crucial for credit risk management have been explicitly defined or updated. These include 'Contract or arrangement', 'Control', 'Director of a UCB', 'Entity', 'Key Managerial Personnel (KMP)', 'Lending' (clarifying exclusion of equity investments for related parties), 'Person', 'Personal Loan', 'Promoter', 'Reciprocally Related Person', 'Related Party', 'Related Person', and 'Specified employees'. The definition of 'Relative' has also been aligned with the Companies Act, 2013.
- Enhanced Policy Requirement: UCBs are now mandated to implement a comprehensive, Board-approved Credit Risk Management policy. This policy must specifically cover aspects like lending to related parties, property valuation (including empanelment of valuers), and the review/renewal of credit facilities.
- Clarification on Statutory Lending Restrictions: The circular reiterates the prohibition under Section 20(1)(b) of the Banking Regulation Act, 1949, against UCBs granting loans or advances to their directors, firms/companies where directors have interest, or individuals for whom directors are partners/guarantors. Crucially, it provides clarifications and exceptions to this rule:
- The prohibition does not apply to advances granted or commitments made prior to the director's appointment to the bank's Board.
- It also specifies exceptions allowing loans to certain individuals with defined limits for specific purposes:
- Relatives of directors: Up to ₹25 lakh for purposes like education, medical expenses, or house purchase.
- Key Managerial Personnel (KMP) or Specified Employees: Up to ₹50 lakh.
Exam Relevance
- Definitions: The new definitions of 'Related Party', 'Reciprocally Related Person', 'KMP', and 'Specified employees' are critical. Exam Insight: Questions often test the exact criteria for these definitions, especially their linkage to the Companies Act, 2013, or the Insolvency and Bankruptcy Code (IBC), 2016.
- Lending Restrictions (Section 20(1)(b) BR Act): Understanding the general prohibition on lending to directors and related entities is fundamental. Exam Insight: A strong understanding of the provisions of the Banking Regulation Act related to director advances is often tested.
- Exemptions to Lending Restrictions: The conditions under which loans to directors/related parties are permitted are high-yield.
- Prior Loans: Loans existing before a director's appointment are exempt. Exam Insight: Questions might present scenarios involving a director's existing loan.
- Specific Lending Limits: The limits for loans to relatives (up to ₹25 lakh) for education/medical/house, and to KMP/specified employees (up to ₹50 lakh) are crucial. Exam Insight: Exact numerical limits and the conditions for these exceptions are frequently asked.
- Board Approved Policy: The requirement for a comprehensive, Board-approved Credit Risk Management policy, explicitly covering related party lending and property valuation. Exam Insight: This highlights governance and compliance requirements, which can be part of broader banking operations questions.
Summary Table: Key Amendments in UCB Credit Risk Management
| Aspect | Before (Directions, 2025 - Implied/General) | After (Amendment Directions, 2026) |
|---|---|---|
| Key Definitions | General definitions, less detailed. | New/Modified Definitions for 'Related Party', 'Reciprocally Related Person', 'KMP', 'Specified employees', 'Relative' (aligned with Companies Act, 2013), and more. |
| Board Policy Scope | General Credit Risk Management policy. | Comprehensive, Board-approved policy explicitly covering related party lending, property valuation (including empanelment of valuers), and review/renewal of credit facilities. |
| Lending to Directors (BR Act Sec 20(1)(b)) | General prohibition. | Reiteration of prohibition with explicit clarifications/exceptions: |
| - Prior Advances | Not explicitly stated as exception. | Exempted: Advances granted prior to director appointment. |
| - Loans to Relatives | Not explicitly detailed with limits. | Permitted (Exception): Up to ₹25 lakh for a director's relative, specifically for education, medical expenses, or house purchase. |
| - Loans to KMP/Employees | Not explicitly detailed with limits for KMP/Specified Employees. | Permitted (Exception): Up to ₹50 lakh for Key Managerial Personnel (KMP) or Specified Employees of the UCB. |
| Effective Date | N/A | January 05, 2026 (Date of Circular). |
Reserve Bank of India (Rural Co-operative Banks – Credit Risk Management) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its regulatory framework to ensure sound banking practices and mitigate risks. These Amendment Directions, issued on January 05, 2026, for Rural Co-operative Banks (RCBs), are a part of this continuous effort. They build upon the existing Reserve Bank of India (Rural Co-operative Banks – Credit Risk Management) Directions, 2025, aiming to refine specific aspects, particularly concerning credit risk management and lending to related parties, while also providing crucial clarifications on statutory restrictions.
Key Decision
The RBI, under Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949, has introduced significant amendments primarily focused on:
- Defining Key Terms: Introducing or clarifying definitions for terms like ‘Contract or arrangement’, ‘Control’, ‘Director of a RCB’, ‘Entity’, ‘Key Managerial Personnel (KMP)’, ‘Lending’ (in context of related parties), ‘Person’, ‘Personal Loan’, ‘Promoter’, ‘Reciprocally Related Person’, ‘Related Party’, ‘Related Person’, ‘Relative’, ‘Specified employees’, and ‘Substantial interest’. These definitions often align with the Companies Act, 2013, or IBC, 2016.
- Board Approved Policies: Mandating RCBs to establish comprehensive Board-approved policies for Credit Risk Management, specifically covering aspects like lending to related parties, valuation practices, and maintenance of various account types.
- Clarifications on Section 20(1)(b) of BR Act: Explicitly clarifying that co-operative entities (State Co-operative Banks (StCBs), Central Co-operative Banks (CCBs), and Primary Agricultural Credit Societies (PACS)) are not to be construed as a 'company' or 'firm' for the purpose of Section 20 of the Banking Regulation Act, 1949. This removes restrictions on StCB's credit facilities to CCBs and PACS, and CCB's credit facilities to PACS.
- Exceptions to Restrictions: Providing specific exceptions where existing restrictions on advances would not apply, such as pre-existing credit facilities to companies where a director of the bank later gains substantial interest, with strict conditions on renewal or enhancement.
Exam Relevance
- Target Entities: This circular is specifically applicable to Rural Co-operative Banks (RCBs). Why it matters for exam: Questions might ask about the scope of application (e.g., which type of banks this circular targets).
- Definition of Related Party: Understand the comprehensive definition of 'Related Party' which includes 'Related Persons' and 'Reciprocally Related Persons', and specific entities. Note the exclusion of Government-owned/controlled entities from being 'related parties' to a government-owned bank solely due to common ownership. Why it matters for exam: Definitional clarity is crucial, and questions often test the precise scope and exclusions (e.g., "Which of the following is NOT considered a related party?").
- Definition of Lending to Related Party: 'Lending' in the context of a related party includes funded and non-fund-based credit facilities, and investments in debt instruments, but specifically excludes equity investments. Why it matters for exam: This specific inclusion/exclusion is a classic factual question point.
- Reciprocally Related Person: Focus on the definition, especially that it involves a director of another Co-operative bank (excluding independent/nominee directors by Gov/RBI or a statutory body) and their relatives/firms. Why it matters for exam: The 'reciprocally' aspect makes it unique and testable.
- Section 20(1)(b) of BR Act Clarity: The most critical takeaway is that co-operative entities (StCBs, CCBs, PACS) are not considered 'company' or 'firm' under Section 20(1)(b) of the Banking Regulation Act, 1949. This means there are no restrictions on StCB lending to CCBs/PACS, or CCB lending to PACS based on this section. Why it matters for exam: This is a direct, significant policy clarification that can be directly tested, often as a true/false or direct question about inter-cooperative lending rules.
- Credit Facilities to Director-Linked Companies: Note the exception allowing pre-existing credit facilities to a company where a director of the bank later acquires substantial interest. However, the bank cannot renew, enhance, or change terms after the director's appointment until the directorship is relinquished. Why it matters for exam: Questions often focus on such conditional exceptions and associated restrictions.
- Board Policy Requirement: RCBs must have a comprehensive Board-approved policy on Credit Risk Management, explicitly covering lending to related parties, valuation, and account maintenance. Why it matters for exam: This highlights a key governance requirement.
Summary Table
| Feature | Old Provision (Implied/Previous) | New Provision (Amendment Directions, 2026) |
|---|---|---|
| Circular Number | N/A (Previous Directions) | RBI/2025-26/178 DOR.CRE.REC.379/07-02-006/2025-26 |
| Date | N/A | January 05, 2026 |
| Applicability | Rural Co-operative Banks (RCBs) | Rural Co-operative Banks (RCBs) |
| Key Definitions | Less comprehensive | New/clarified definitions for 'Related Party', 'KMP', 'Lending' (includes debt, excludes equity), 'Reciprocally Related Person', etc. |
| Board Policy | General Credit Risk Management | Comprehensive Board approved policy for Credit Risk Management, explicitly covering lending to related parties, valuation, etc. |
| Section 20(1)(b) BR Act | Potential ambiguity | Clarified: Co-operative entities (StCBs, CCBs, PACS) are NOT 'company' or 'firm'. No restriction on StCB to CCB/PACS, or CCB to PACS lending under this section. |
| Existing Director-Linked Loans | Unclear treatment | Pre-existing facilities allowed if made before director's appointment, but no renewal/enhancement/change of terms until directorship relinquished. |
Forced ID 13255
Background
The Reserve Bank of India (RBI) has issued amendment directions to its existing "Reserve Bank of India (Non-Banking Financial Companies - Credit Risk Management) Directions, 2025". This circular, dated January 05, 2026, with circular number RBI/2025-26/179, aims to refine and strengthen the credit risk management framework for Non-Banking Financial Companies (NBFCs), particularly focusing on lending to 'Related Parties'. The amendments are issued under various sections of the RBI Act, NHB Act, and Factoring Regulation Act, to ensure prudent risk management and public interest.
Key Decision
The RBI's amendment directions primarily focus on enhancing the regulatory framework for NBFCs regarding "Lending to Related Parties".
- Scope Clarification: Certain paragraphs (6-8) of the original directions are now exclusively applicable to 'Notified NBFCs'.
- Expanded Definitions: A comprehensive set of new definitions has been introduced or clarified, including 'Committee on lending to related parties', 'Related Party', 'Related Person', 'Lending' (excluding equity investments), 'Key Managerial Personnel (KMP)', 'Promoter', 'Control', 'Personal Loans' (excluding financial asset investments), and 'Specified employees'. Notably, Government-owned/controlled entities are generally not treated as related parties for government-owned NBFCs solely due to common ownership.
- New Regulatory Framework for Related Party Lending: The previous regulatory sections (Section B, A.1, A.2, and Paragraphs 9-13) concerning related party transactions have been deleted and replaced with a new comprehensive framework (A.3, Paragraphs 13A-13Q).
- Credit Policy Mandates: NBFC Boards are now explicitly responsible for establishing mechanisms for lending to related parties. The credit policy must contain specific provisions, safeguards, and an aggregate limit for loans to related parties (with sub-limits for single/group related parties), all within existing prudential exposure norms. It must also cover lending to 'Specified employees' and their relatives and incorporate a whistleblowing mechanism for irregular loans.
- Materiality Thresholds: For the first time, specific materiality thresholds have been introduced for credit facilities, including personal loans to directors or KMPs, extended to related parties. These vary based on the NBFC's layer.
Exam Relevance
- Circular Date & Number: The circular is dated January 05, 2026, and its number is RBI/2025-26/179. Exam Insight: Questions often test the latest circulars, their numbers, and effective dates.
- Key Definitions: New and updated definitions like 'Related Party', 'Related Person', 'Lending' (for related parties excluding equity investments), 'Key Managerial Personnel (KMP)', and 'Specified employees'. Exam Insight: Understanding these precise definitions is crucial as questions can ask for specific inclusions or exclusions (e.g., what constitutes 'Lending' in this context).
- Materiality Thresholds: Credit facilities to related parties (including personal loans to directors/KMPs) are subject to specific materiality thresholds based on NBFC layers:
- Upper & Top Layer NBFCs: Not higher than ₹10 crore
- Middle Layer NBFCs: Not higher than ₹5 crore
- Base Layer NBFCs: Not higher than ₹1 crore
- Exam Insight: These exact financial limits are highly testable. Remember which layer corresponds to which threshold.
- Excluded Related Parties: Government of India/State Government-owned or controlled entities are not treated as related parties to a government-owned NBFC just due to common ownership or control. Also, advice given in a professional capacity is excluded. Exam Insight: Exceptions and exclusions from definitions are common question areas.
- Board Responsibilities: The Board of the NBFC has overall responsibility for ensuring mechanisms for lending to related parties and incorporating specific provisions in the credit policy. Exam Insight: Questions can target the responsible authority for policy implementation.
- Deletion of Old Provisions: The existing Section B, sub-sections A.1 and A.2, and paragraphs 9 through 13 have been deleted. Exam Insight: Recognizing that old provisions have been replaced by new ones helps distinguish between past and current regulations.
Summary Table
| Feature | Details |
|---|---|
| Circular Date | January 05, 2026 |
| Circular Number | RBI/2025-26/179 |
| Purpose | Amend Credit Risk Management Directions, 2025 for NBFCs, especially regarding 'Lending to Related Parties'. |
| Scope | All NBFCs (with specific paragraphs applicable to 'Notified NBFCs'). |
| Key Policy Change | Replacement of old related party lending sections with a new framework (A.3, Paragraphs 13A-13Q), requiring comprehensive credit policy provisions, safeguards, and whistleblowing mechanisms. |
| Materiality Thresholds | Upper Layer & Top Layer NBFCs: Up to ₹10 crore. Middle Layer NBFCs: Up to ₹5 crore. Base Layer NBFCs: Up to ₹1 crore (for credit facilities to related parties, including personal loans to directors/KMPs). |
| Lending Definition | Extends funded/non-fund-based credit to related parties; includes debt investments, excludes equity investments. |
| Excluded Entities | Government-owned/controlled entities not related parties to government NBFCs solely due to common ownership/control. Professional advice is excluded. |
Forced ID 13257: RBI (Commercial Banks – Financial Statements: Presentation and Disclosures) – Second Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its regulatory framework to ensure the stability and transparency of the banking sector. This circular, issued on January 05, 2026, serves as the Second Amendment to the existing Reserve Bank of India (Commercial Banks - Financial Statements: Presentation and Disclosures) Directions, 2025. The amendment is a direct consequence of the issuance of the Reserve Bank of India (Commercial Banks – Credit Risk Management) – Amendment Directions, 2026. This directive is issued under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, aiming to enhance public interest and regulatory oversight.
Key Decision
The RBI has decided to introduce new mandatory disclosure requirements for commercial banks regarding their "Exposures to Related Parties." This amendment inserts a new sub-sub paragraph 10(5)(ix) under sub-paragraph 10(5) ('Exposures') within Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’ of the Directions.
Commercial banks will now be required to disclose detailed information on related party transactions in their financial statements, categorized into two main sections:
A. Loans to Related Parties:
- Aggregate value of loans sanctioned to related parties during the year.
- Aggregate value of outstanding loans to related parties as on 31st March.
- Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on 31st March.
- Aggregate value of outstanding loans to related parties categorized as:
- Special Mention Accounts (SMAs) as on 31st March.
- Non-Performing Assets (NPAs) as on 31st March.
- Amount of provisions held in respect of loans to related parties as on 31st March.
B. Contracts and Arrangements involving Related Parties:
- Aggregate value of contracts and arrangements awarded to related parties during the year.
- Aggregate value of outstanding contracts and arrangements involving related parties as on 31st March.
These amendments will come into force from April 1, 2026. Banks have the discretion to implement these changes earlier if they choose.
Exam Relevance
- Related Party Disclosures: Banks are now mandated to provide detailed disclosures on their "Exposures to Related Parties" in their financial statements. Why it matters for exam: Questions might ask about the specific categories of information that need to be disclosed (e.g., loans sanctioned, outstanding, SMAs, NPAs, provisions, contracts).
- Implementation Date: The new directions are effective from April 1, 2026. Why it matters for exam: Important dates for regulatory changes are frequently tested, especially effective dates.
- Legal Provisions: The RBI issued these directions using powers under Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters for exam: Knowing the specific sections of banking legislation under which RBI issues directives is crucial for regulatory affairs questions.
- Purpose of Amendment: The amendment aims to enhance transparency regarding related party transactions and improve credit risk management disclosures, consequent to Credit Risk Management Directions, 2026. Why it matters for exam: Understanding the "why" behind a regulation helps in answering conceptual questions.
Summary Table: Key Amendments
| Feature | Before (Directions, 2025) | After (Second Amendment Directions, 2026) |
|---|---|---|
| Related Party Disclosures | General disclosures on exposures, but not specific details as per this format. | Mandatory, detailed disclosures on: - Loans sanctioned and outstanding - Proportion to total credit exposure - Classification as SMA/NPA - Provisions held - Contracts & arrangements awarded and outstanding. |
| Effective Date | N/A (for this specific amendment) | April 1, 2026 (Banks may implement earlier) |
| Legal Basis | N/A (for this specific amendment) | Sections 21 and 35A of the Banking Regulation Act, 1949 |
Reserve Bank of India (Small Finance Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
Previously, Small Finance Banks (SFBs) were governed by the Reserve Bank of India (Small Finance Banks – Financial Statements: Presentation and Disclosures) Directions, 2025. The Reserve Bank of India (RBI) reviewed these directions. This amendment became necessary due to the issuance of new Reserve Bank of India (Small Finance Banks – Credit Risk Management) – Amendment Directions, 2026. The RBI, using its powers under Sections 21 and 35A of the Banking Regulation Act, 1949, and other enabling laws, deemed it necessary to make these changes in public interest.
Key Decision
The RBI has introduced a new sub-paragraph within Chapter-III 'Disclosure in Financial Statements – Notes to Accounts' for Small Finance Banks. This mandates detailed disclosures on 'Exposures to Related Parties'. The definition of 'related parties' will be as per the Reserve Bank of India (Small Finance Banks – Credit Risk Management) Directions, 2025.
SFBs are now required to disclose the following information:
- Aggregate value of loans sanctioned to related parties during the year.
- Aggregate value of outstanding loans to related parties as on March 31.
- Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on March 31.
- Aggregate value of outstanding loans to related parties categorized as Special Mention Accounts (SMA) and Non-Performing Assets (NPA) as on March 31.
- Amount of provisions held in respect of loans to related parties as on March 31.
- Aggregate value of contracts and arrangements awarded to related parties during the year.
- Aggregate value of outstanding contracts and arrangements involving related parties as on March 31.
These amendments will come into force from April 1, 2026, although banks have the option to implement them earlier.
Exam Relevance
- Applicability: This circular specifically applies to Small Finance Banks (SFBs). Why it matters for exam: Questions often test the specific type of institution regulated by a particular RBI circular.
- Key Disclosure: SFBs are now mandated to disclose detailed information on 'Exposures to Related Parties' in their financial statements. Why it matters for exam: Understanding the new reporting requirements, such as reporting outstanding loans, SMA/NPA status, and provisions for related party exposures, is crucial.
- Effective Date: The amendments are effective from April 1, 2026. Why it matters for exam: Specific dates of implementation for new regulations are high-yield questions.
- Legal Authority: The RBI has issued these directions under Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters for exam: Knowing the legal provisions under which RBI exercises its regulatory powers is important.
Summary Table
| Aspect | Details |
|---|---|
| Circular Number & Date | RBI/2025-26/182, January 05, 2026 |
| Applicability | Small Finance Banks (SFBs) |
| Key Amendment | Mandatory disclosure of Related Party Exposures in Financial Statements |
| Specific Disclosures | Loans sanctioned, outstanding balances, SMA/NPA status, provisions, contracts |
| Effective Date | April 1, 2026 |
| Legal Basis | Sections 21 and 35A of Banking Regulation Act, 1949 |
Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
This circular, dated January 05, 2026, amends the existing Reserve Bank of India (Local Area Banks - Financial Statements: Presentation and Disclosures) Directions, 2025. The amendment is a direct consequence of new directions issued regarding "Credit Risk Management" for Local Area Banks (LABs). It's part of the RBI's ongoing efforts to enhance transparency and strengthen governance, especially concerning potential conflicts of interest arising from related party transactions. The powers for this amendment are derived from Sections 21 and 35A of the Banking Regulation Act, 1949.
Key Decision
The RBI has mandated Local Area Banks to include detailed disclosures about their "Exposures to Related Parties" in their financial statements. Specifically, a new sub-sub paragraph 10(5)(ix) will be inserted under Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’, sub-paragraph 10(5) on ‘Exposures’.
This new disclosure requirement covers:
- Loans to Related Parties: This includes sanctioned and outstanding loan values, their proportion to total credit, classification as Special Mention Accounts (SMA) or Non-Performing Assets (NPA), and provisions held against these loans.
- Contracts and Arrangements involving Related Parties: This includes the value of contracts awarded and outstanding arrangements.
The definition of "related parties" will be as per the Reserve Bank of India (Local Area Banks – Credit Risk Management) Directions, 2025. These amendments will come into force from April 1, 2026.
Exam Relevance
- Applicability: This circular specifically applies to Local Area Banks (LABs). Why it matters for exam: Questions often test the specific type of banking entity a regulation applies to.
- Effective Date: The amendments are effective from April 1, 2026. Why it matters for exam: Important dates are common factual questions.
- Enabling Act: The RBI issues these directions under Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters for exam: Legal backing and specific sections of key banking acts are frequently asked.
- Key Disclosure Topic: Local Area Banks must now disclose "Exposures to Related Parties" in their financial statements, specifically in the Notes to Accounts under the 'Exposures' section. Why it matters for exam: Understanding the what and where of new disclosure requirements is crucial.
- Information Details: The disclosure includes details like aggregate value of loans (sanctioned/outstanding), proportion to total credit exposure, classification as SMA or NPA, and provisions held for related party loans. Why it matters for exam: Specific items required for disclosure, especially financial figures or categories like SMA/NPA, are high-yield questions.
- Reference Definition: The definition of "related parties" is derived from the Reserve Bank of India (Local Area Banks – Credit Risk Management) Directions, 2025. Why it matters for exam: Referring to related regulations or definitions helps in conceptual understanding and can be a direct question.
Summary Table
| Feature | Details |
|---|---|
| Circular Title | Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026 |
| Circular Date | January 05, 2026 |
| Applicability | Local Area Banks (LABs) |
| Primary Act | Sections 21 and 35A of the Banking Regulation Act, 1949 |
| Previous Directions | Reserve Bank of India (Local Area Banks - Financial Statements: Presentation and Disclosures) Directions, 2025 |
| Key Amendment | Insertion of new sub-sub paragraph 10(5)(ix) in Chapter-III 'Notes to Accounts' for 'Exposures'. |
| New Requirement | Disclosure of "Exposures to Related Parties" in financial statements. |
| Disclosure Items | Loans to Related Parties (sanctioned, outstanding, SMA/NPA, provisions), Contracts/Arrangements with Related Parties (awarded, outstanding). |
| Effective Date | April 1, 2026 (Banks may implement earlier). |
Reserve Bank of India (Regional Rural Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
This circular, RBI/2025-26/184 dated January 05, 2026, amends the existing 'Reserve Bank of India (Regional Rural Banks - Financial Statements: Presentation and Disclosures) Directions, 2025'. The amendment is a direct consequence of the issuance of the 'Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2026'. It is issued by the Reserve Bank of India (RBI) under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, indicating the RBI's satisfaction that it is necessary and expedient in the public interest.
Key Decision
On a review, the RBI has decided to enhance the transparency and disclosure requirements for Regional Rural Banks (RRBs). The key decision involves:
- Insertion of New Disclosure Requirement: A new sub-sub paragraph 10(5)(ix) has been inserted under Chapter-III 'Disclosure in Financial Statements – Notes to Accounts', specifically within the sub-paragraph 10(5) on 'Exposures'.
- Mandatory Disclosure of Related Party Exposures: RRBs are now mandated to disclose detailed information regarding their 'Exposures to Related Parties'. The definition of 'related parties' for these disclosures will be as defined in the 'Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025'.
- Specific Disclosure Categories: The disclosure framework includes a detailed table requiring information on:
- A. Loans to Related Parties: This covers aggregate value of loans sanctioned, outstanding loans (including proportion to total credit exposure), outstanding loans categorized as Special Mention Accounts (SMAs) or Non-Performing Assets (NPAs), and provisions held against these loans.
- B. Contracts and Arrangements involving Related Parties: This includes aggregate value of contracts and arrangements awarded and outstanding contracts/arrangements.
- Effective Date: These amendments shall come into force from April 1, 2026. Banks have the option to implement them earlier if they choose.
Exam Relevance
- Applicability: This circular specifically targets Regional Rural Banks (RRBs). Why it matters: Questions often test the specific types of entities (e.g., RRBs, Commercial Banks, NBFCs) to which a regulation applies.
- Effective Date: The amendments are effective from April 1, 2026. Why it matters: Key dates of implementation for new regulations are high-yield questions, especially if there's an option for earlier implementation.
- Core Disclosure Requirement: RRBs must now disclose detailed "Exposures to Related Parties" in their financial statements. Why it matters: Understanding the nature of new disclosures, their purpose (transparency, risk management), and specific elements (loans, contracts, SMA/NPA classification) is crucial for financial accounting and banking awareness sections.
- Regulatory Powers: The powers cited for issuing these directions are Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters: Knowing the specific legislative sections empowering the RBI is important for static banking awareness questions.
- Definition Source: The definition of "Related Parties" for these disclosures is to be taken from the Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025. Why it matters: Linking related circulars and understanding where definitions originate from demonstrates comprehensive knowledge.
Summary Table
| Particulars | Before Amendment (Prior to April 1, 2026) | After Amendment (From April 1, 2026) |
|---|---|---|
| Disclosure of Related Party Exposures by RRBs | Not explicitly mandated under sub-sub paragraph 10(5)(ix) of existing directions. | Mandatory Disclosure: Regional Rural Banks (RRBs) must insert a new sub-sub paragraph 10(5)(ix) under Chapter-III 'Disclosure in Financial Statements – Notes to Accounts' to detail 'Exposures to Related Parties'. This includes: A. Loans to Related Parties: 1. Aggregate value of loans sanctioned 2. Aggregate value of outstanding loans 3. Proportion of outstanding loans to total credit exposure 4. Outstanding loans categorized as SMAs or NPAs 5. Amount of provisions held B. Contracts & Arrangements involving Related Parties: 6. Aggregate value of contracts awarded 7. Aggregate value of outstanding contracts. |
| Effective Date | N/A | April 1, 2026 (Banks may implement earlier). |
| Definition of 'Related Parties' for Disclosures | N/A | As defined in Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025. |
Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its regulatory framework for financial institutions. In 2025, the RBI had issued comprehensive "Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions". This circular, dated January 1, 2026, serves to amend those existing directions, specifically focusing on the capital adequacy norms for Non-Banking Financial Companies (NBFCs) related to their lending to infrastructure projects. The aim is to refine how risk is assessed and weighted for certain high-quality assets, thereby impacting the capital NBFCs need to hold.
Key Decision
This amendment significantly modifies the risk weights assigned to loans provided by NBFCs to ‘High-quality infrastructure projects’. The changes are contingent on the repayment status of the sanctioned project debt:
- For loans to ‘High-quality infrastructure projects’ where the borrower has repaid at least 2% of the sanctioned project debt, the risk weight is set at 75%.
- For loans to ‘High-quality infrastructure projects’ where the borrower has repaid at least 5% of the sanctioned project debt, the risk weight is further reduced to 50%.
It's crucial to note that the definition of ‘High-quality infrastructure projects’ is referenced from another RBI circular: the "Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026".
A key proviso states that if these projects subsequently fail to meet the 'High-quality' conditions, they will be subject to higher, standard risk weights. Additionally, for determining the repayment threshold, any additional debt sanctioned as part of a loan takeover or otherwise should be clubbed with previous loans.
These Amendment Directions become applicable from April 1, 2026, or earlier if an NBFC fully adopts them. A transitional provision allows NBFCs to maintain extant (existing) lower risk weights for exposures that would attract a higher risk weight under these new directions until the next review/renewal or March 31, 2027, whichever comes earlier.
Exam Relevance
- Applicability: These directions are crucial for understanding the regulatory framework governing Non-Banking Financial Companies (NBFCs). Exam Insight: Questions often test which entities a particular regulation applies to.
- Risk Weights for Infrastructure Loans: The specific percentage weights (risk weights) for loans to high-quality infrastructure projects are 75% and 50%, depending on repayment thresholds. Exam Insight: Numerical values, especially percentages for risk weights, are frequently asked.
- Repayment Thresholds: The conditions for reduced risk weights are a minimum 2% and 5% repayment of sanctioned project debt. Exam Insight: These specific thresholds are prime candidates for multiple-choice questions.
- Effective Date: The amendment directions are effective from April 1, 2026. Exam Insight: Dates of applicability for new regulations are important for chronological and policy understanding.
- Transitional Period: NBFCs have a grace period until March 31, 2027, for exposures attracting higher risk weights under the new norms. Exam Insight: Understanding transitional arrangements and their deadlines is key, especially the "whichever is earlier" clause.
- Definition Reference: The circular references the definition of 'High-quality infrastructure projects' from the "Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026". Exam Insight: Recognizing that definitions might be cross-referenced between circulars highlights the interconnectedness of regulations.
Summary Table
| Sr. No. | On-balance Sheet items (Loans to ‘High-quality infrastructure projects’) | Percentage Weight (Risk Weight) |
|---|---|---|
| (e)(i) | Borrower has repaid at least 2% of the sanctioned project debt | 75% |
| (e)(ii) | Borrower has repaid at least 5% of the sanctioned project debt | 50% |
Note: Projects failing to meet 'High-quality' conditions revert to higher risk weights. Repayment threshold is based on sanctioned project debt; additional debt should be clubbed.
Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) had previously issued the Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Directions, 2025. This latest circular, RBI/2025-26/169 DOR.CRE.REC.372/07-03-008/2025-26, dated January 1, 2026, serves as an amendment to those earlier directions. It is issued under the powers conferred by Chapter III B of the RBI Act, 1934, aiming to enhance the management of concentration risk by Non-Banking Financial Companies (NBFCs) in the public interest.
Key Decision
This amendment introduces a crucial definition for "high-quality infrastructure projects" within the existing Concentration Risk Management Directions. This new classification will apply to infrastructure lending that meets all of the following stringent criteria:
- Operational Stability: The project must have completed at least one year of operations after achieving its date of commercial operations, without any significant breach of lender covenants.
- Asset Quality: The exposure must be classified as 'standard' in the lender's books.
- Revenue Assurance: The borrower's revenue must be derived from rights granted under a concession or contract by a Central Government, State Government, public sector entity, or a statutory/regulatory body. Critically, the contractual provisions must protect these rights for the entire concession/contract period, provided the borrower fulfills its obligations.
- Robust Lender Protection: The concession or contractual provisions must offer a high degree of protection for lenders, which must include, at a minimum:
- An escrow / Trust and Retention Account mechanism to ringfence cash flows.
- Pari-passu charge in favor of the lender over all movable and immovable assets.
- Clear mitigation of risk for lenders in case of early termination (e.g., step-in rights for lenders, minimum termination payments).
- Financial Strength: The borrower must possess sufficient internal or external financial arrangements to cover current and future working capital and other project funding requirements, as assessed by the lender.
- Covenant Restrictions: The borrower is restricted from acting to the detriment of the lender, such as issuing additional debt against or further encumbering the project's cashflows and assets without the consent of existing lenders.
These Amendment Directions will be applicable when an NBFC decides to implement the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Amendment Directions, 2026, or from April 1, 2026, whichever comes earlier.
Exam Relevance
- Circular Date & Number: Pay attention to the circular number RBI/2025-26/169 and the issuance date January 1, 2026. Exam Insight: Circular numbers and dates are often tested to verify knowledge of the latest regulations.
- Applicability Date: Note the effective date of April 1, 2026, or earlier if other related directions are implemented. Exam Insight: Effective dates for new rules are frequent exam questions.
- Definition of 'High-Quality Infrastructure Projects': Understand the six specific criteria for this classification. Exam Insight: Questions may ask to identify criteria that qualify a project as 'high-quality' or disqualify it.
- Operational Period: The requirement for one year of operations post commercial date is a key detail. Exam Insight: Specific timeframes are commonly tested.
- Lender Protection Mechanisms: Remember the mandatory provisions for lender protection: escrow/TRA, pari-passu charge, and early termination mitigation. Exam Insight: These mechanisms are fundamental risk management tools and are high-yield topics.
- Asset Classification: The exposure must be 'standard'. Exam Insight: Asset classification is a core banking concept, and its link to new definitions is important.
Summary Table
| Aspect | Detail |
|---|---|
| Circular Title | Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Amendment Directions, 2026 |
| Circular Number | RBI/2025-26/169 DOR.CRE.REC.372/07-03-008/2025-26 |
| Date of Issue | January 1, 2026 |
| Applicability Date | April 1, 2026, or earlier (with related Capital Adequacy Directions) |
| Key Change | Introduction of criteria for classifying "high-quality infrastructure projects" for NBFC lending. |
| Operational Requirement | Project must complete one year of operations post commercial date without material covenant breach. |
| Asset Classification | Exposure must be classified as 'standard'. |
| Key Lender Protections | Escrow/Trust & Retention Account, Pari-passu charge, Mitigation of early termination risk (e.g., step-in rights). |
| Governing Act | Chapter III B of the Reserve Bank of India Act, 1934. |
Forced ID 13246: Reporting MTSS Business in CIMS
Background
The Reserve Bank of India (RBI) has launched its next-generation data warehouse, the Centralised Information Management System (CIMS). This system is designed to modernize and streamline the collection and management of data from various regulated entities, improving efficiency and analytical capabilities.
Key Decision
Following the introduction of CIMS, the RBI has decided that the reporting of the "MTSS Business" return will now be conducted exclusively through the CIMS portal.
- Applicability: All MTSS (Money Transfer Service Scheme) Overseas Principals.
- Return Details: The specific return is named "MTSS Business" with Return Code R103.
- Frequency: This return is required Monthly.
- Commencement: Reporting for the period of December 2025 onwards must be done in CIMS.
- Submission Deadline: Returns for every month must be submitted by the 7th of the succeeding month (e.g., December 2025 return by January 07, 2026).
- Access: Admin Users for each reporting entity have been created in CIMS, and they are responsible for creating login credentials for submittors.
- Legal Framework: This directive is issued under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Non-compliance will result in penal action.
Exam Relevance
- CIMS (Centralised Information Management System): This is RBI's latest data warehouse. Why it matters for exam: Questions often focus on new technological initiatives and systems launched by RBI for regulatory purposes.
- MTSS Business Return (R103): Specific details like the name of the return (MTSS Business) and its Return Code (R103) are important. Why it matters for exam: Understanding which specific reports are subject to new regulatory requirements can be tested.
- Reporting Frequency & Deadline: The return is Monthly and must be submitted by the 7th of the succeeding month. Why it matters for exam: Specific reporting frequencies and deadlines are common factual questions in banking exams.
- Legal Provisions: The circular is backed by Section 12 and Section 19 of the Payment and Settlement Systems Act, 2007. Why it matters for exam: Awareness of the legal acts and specific sections empowering RBI's directives is crucial.
Summary Table
| Feature | Details |
|---|---|
| Circular Number | RBI/2025-26/170 CO.DPSS.ODD.No.S1072/06-08-024/2025-2026 |
| Date | January 01, 2026 |
| Issued By | Department of Payment and Settlement Systems (DPSS) |
| Applicable To | All MTSS Overseas Principals |
| Key Change | Reporting of MTSS Business (R103) shifts to CIMS |
| Reporting Period Starts | December 2025 onwards |
| Reporting Frequency | Monthly |
| Submission Deadline | By the 7th of the succeeding month |
| Enabling Act | Payment and Settlement Systems Act, 2007 (Sections 12 & 19) |
Returns – Department of Payment and Settlement Systems – Submission in CIMS
Background
The Reserve Bank of India (RBI) has launched its next-generation data warehouse, known as the Centralised Information Management System (CIMS). CIMS is designed to streamline and enhance data collection and management across various regulated entities. To transition reporting to this new system, the RBI is issuing instructions for different returns to be submitted via CIMS. This particular circular focuses on specific reporting requirements for White Label ATM Operators.
Key Decision
The RBI has decided to mandate the submission of the "WLA Statistics" return (Return Code R330) on a monthly basis through the newly launched CIMS portal.
- Who Needs to Report: All White Label ATM Operators.
- What to Report: WLA Statistics (Return Code R330).
- How Often: Monthly.
- Where to Report: CIMS portal (https://cims.rbi.org.in/#/login).
- When to Start: Reporting for the period December 2025 onwards.
- Submission Deadline: The return for every month must be submitted by the 7th of the succeeding month (e.g., December 2025 data by January 07, 2026).
- Access: Admin Users for each reporting entity have been created in CIMS; entity admins need to create user credentials for submission.
- Legal Basis: Issued under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Non-compliance will lead to penal action.
Exam Relevance
- Reporting System: Knowledge of the Centralised Information Management System (CIMS) as RBI's next-generation data warehouse. Why it matters: Questions may test the name of the new RBI data platform for regulatory reporting.
- Reporting Entity: The circular specifically targets White Label ATM Operators. Why it matters: Identifying which type of entity is impacted by new regulations is a common question format.
- Specific Return: The "WLA Statistics" (Return Code R330) is now to be reported via CIMS. Why it matters: The specific return name and its code are high-yield details.
- Reporting Frequency & Deadline: The return is monthly, to be submitted by the 7th of the succeeding month. Why it matters: Exact frequencies and deadlines are frequently asked.
- Effective Date: Reporting commences for data from December 2025 onwards. Why it matters: Important dates or periods for new regulations are often tested.
- Legal Provisions: The directive is issued under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Why it matters: Understanding the legislative backing for RBI directives is crucial.
Summary Table
| Particulars | Details |
|---|---|
| Circular Number | RBI/2025-26/171 CO.DPSS.ODD.No.S1073/06-08-024/2025-2026 |
| Date of Issue | January 01, 2026 |
| Issued By | Department of Payment and Settlement Systems (DPSS), RBI |
| Addressed To | All White Label ATM Operators |
| Subject | Returns – Department of Payment and Settlement Systems – Submission in CIMS |
| New Reporting System | Centralised Information Management System (CIMS), RBI's next-generation data warehouse |
| Return Name | WLA Statistics |
| Return Code | R330 |
| Frequency | Monthly |
| Reporting Period Start | For data from December 2025 onwards |
| Submission Deadline | By the 7th of the succeeding month (e.g., Dec 2025 data by Jan 07, 2026) |
| Legal Provision | Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007 |
Returns – Department of Payment and Settlement Systems – Submission in CIMS
Background
The Reserve Bank of India (RBI) has launched its next-generation data warehouse called the Centralised Information Management System (CIMS). This new system is designed to streamline data collection and management.
Key Decision
This circular mandates all Prepaid Payment Instrument (PPI) Issuers to submit specific returns through the newly launched CIMS portal, moving away from previous reporting mechanisms.
- Who is Impacted: All entities issuing Prepaid Payment Instruments (PPIs).
- What to Report: Two key returns:
- PPI Statistics (Return Code: R100)
- PPI Customer Grievances (Return Code: R360)
- When to Start: Reporting for periods December 2025 onwards.
- How to Report: Submissions must be made on the CIMS portal (https://cims.rbi.org.in/#/login). Admin users of each entity are responsible for creating login credentials for their reporting users.
- Deadlines:
- Monthly returns (PPI Statistics) must be submitted by the 7th of the succeeding month (e.g., December 2025 return by January 07, 2026).
- Quarterly returns (PPI Customer Grievances) must be submitted by the 10th of the succeeding month following the quarter end (e.g., December 2025 quarter return by January 10, 2026).
- Legal Basis: This directive is issued under Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Non-compliance will lead to penal action.
Exam Relevance
- CIMS (Centralised Information Management System): This is RBI's new data warehouse. Why it matters for exam: Questions might ask for the name or purpose of RBI's new centralized data management platform.
- Affected Entities: Prepaid Payment Instrument (PPI) Issuers. Why it matters for exam: Understanding which financial entities are subject to specific RBI directives is crucial.
- Key Returns & Codes: PPI Statistics (R100) and PPI Customer Grievances (R360). Why it matters for exam: Knowing the specific return names and their associated codes can be tested.
- Reporting Frequency: PPI Statistics is Monthly, while PPI Customer Grievances is Quarterly. Why it matters for exam: Differentiating reporting frequencies for various returns is a common area for questions.
- Submission Deadlines: Monthly returns by the 7th of the succeeding month, and Quarterly returns by the 10th of the succeeding month. Why it matters for exam: Exact dates and deadlines are high-yield facts.
- Legal Provisions: Section 12 read with Section 19 of the Payment and Settlement Systems Act, 2007. Why it matters for exam: Legal sections underpinning major regulations are important for regulatory knowledge.
Summary Table
| Return Name | Return Code | Frequency | Reporting Commences From | Submission Deadline |
|---|---|---|---|---|
| PPI Statistics | R100 | Monthly | December 2025 | 7th of succeeding month (e.g., Jan 07, 2026) |
| PPI Customer Grievances | R360 | Quarterly | December 2025 | 10th of succeeding month (e.g., Jan 10, 2026) |
Reserve Bank of India (Commercial Banks – Credit Risk Management) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its regulatory framework to strengthen the banking system and ensure financial stability. These Amendment Directions, issued on January 05, 2026, revise the existing Reserve Bank of India (Commercial Banks - Credit Risk Management) Directions, 2025. The amendments aim to provide greater clarity and expand the scope of definitions, particularly concerning 'related party' transactions and credit risk management, in line with the Banking Regulation Act, 1949, and other relevant statutes.
Key Decision
The circular introduces several significant amendments, primarily focusing on comprehensive definitions related to 'lending to related parties' and refining credit risk management policies for commercial banks.
- Expanded Definitions: A wide array of new definitions have been inserted in Chapter I, including:
- 'Committee on lending to related parties': A Board committee (other than the Audit Committee) to sanction loans to related parties.
- 'Control', 'Promoter', 'Key Managerial Personnel (KMP)', 'Contract or arrangement', 'Person' - all cross-referencing definitions from the Companies Act, 2013, or IBC, 2016.
- 'Director of a bank': Clarified to include nominee and independent directors.
- 'Lending' (to related parties): Includes funded and non-fund-based credit, and debt investments in related parties, but explicitly excludes equity investments.
- 'Reciprocally Related Person': Defines individuals (and their relatives) connected to other financial entities (directors of other banks/AIFIs/co-op banks, trustees of MFs/AIFs). Excludes independent/nominee directors appointed by Gov/RBI/statutory bodies.
- 'Related Party': A very broad definition covering 'related persons', 'reciprocally related persons', and entities where these individuals have significant influence (e.g., partner, director, KMP, promoter, more than 10% shareholding, more than 20% voting rights, control, power to nominate a director, guarantor, or acting on advice). It specifically provides an exception for Government-owned/controlled entities not being related parties to a government-owned bank solely due to common ownership.
- 'Related Person': Defines individuals (and their relatives) associated with the bank itself (e.g., promoter, director, KMP of the bank, owns more than 5% paid-up equity/voting rights, can nominate a director, or is in control of the bank).
- 'Specified employees': Employees up to two levels below the Board.
- Revised Definitions: 'Personal Loan' and 'Relative' definitions now align with Banking Statistics (Harmonised Definitions) and Section 2(77) of the Companies Act, 2013, respectively.
- Strengthened Board Approved Policies: Paragraph 5 of Chapter II is replaced, mandating a comprehensive Board-approved policy on Credit Risk Management. This policy must specifically cover lending to related parties, country risk, unhedged foreign currency exposures, property valuation (including empanelment of valuers), and current/CC/OD account opening.
- Clarification on Statutory Restrictions (Section 20 of BR Act, 1949):
- Paragraph 15 is deleted, and a new Paragraph 15A is inserted.
- This clarifies that foreign bank branches in India must comply with the spirit of Section 20, meaning they cannot lend to a firm/company if a director on the foreign bank's Board abroad has an interest in that firm/company, or if the company is a subsidiary where such a director is interested.
- Exemptions are provided for credit facilities granted prior to appointment of a director with substantial interest.
Exam Relevance
- Circular Number & Date: The circular number RBI/2025-26/173 and date January 05, 2026, are important for identification and chronology. Why it matters for exam: Questions often ask to identify circulars by number or date for recent significant changes.
- Statutory Powers: The circular is issued under Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters for exam: Understanding the legal backing for RBI's directives is crucial.
- Lending to Related Parties (Exclusions): The definition of 'Lending' for related parties excludes equity investments. Why it matters for exam: Specific exclusions or inclusions are frequently tested.
- Shareholding/Voting Thresholds: 'Related Party' definition includes shareholders with more than 10% paid-up equity and those controlling more than 20% voting rights. 'Related Person' includes those owning more than 5% paid-up equity or voting rights of the bank. Why it matters for exam: These specific percentage thresholds are prime targets for multiple-choice questions.
- Committee Name: The requirement for a 'Committee on lending to related parties' (not the Audit Committee) is a specific structural change. Why it matters for exam: Names of specific committees or their mandated functions are often asked.
- Exclusion for Government Entities: Government-owned/controlled entities are not treated as related parties to a government bank solely due to common ownership/control. Why it matters for exam: Such specific exceptions are important details to remember.
- Foreign Bank Branches: The clarification regarding the spirit of Section 20 of the Banking Regulation Act, 1949, for foreign bank branches in India, particularly concerning lending where a director on the foreign bank's Board abroad has an interest. Why it matters for exam: This tests understanding of how Indian banking laws extend to international entities operating in India.
- Mandatory Policy Areas: The Board-approved Credit Risk Management policy must cover aspects like lending to related parties, country risk, unhedged foreign currency exposures, property valuation, and current/CC/OD accounts. Why it matters for exam: The comprehensive list of mandated policy areas could be asked as a "which of the following is included/excluded" type question.
Summary Table
| Aspect | Old Provision (Implicit/Previous) | New Provision (RBI/2025-26/173) |
|---|---|---|
| Definitions | Less comprehensive definitions, especially for 'Related Party' and 'Lending'. | Extensive new definitions including 'Committee on lending to related parties', 'Reciprocally Related Person', 'Related Party' (with >10% equity, >20% voting rights, etc.), 'Related Person' (with >5% equity/voting rights in the bank), 'Lending' (excluding equity). |
| Lending Scope (Related Parties) | General lending. | 'Lending' specifically includes funded/non-fund-based credit and debt investments but excludes equity investments. |
| Board Policy (Credit Risk) | General Credit Risk Management policy. | Mandates a comprehensive Board-approved policy specifically covering lending to related parties, country risk, unhedged foreign currency exposures, property valuation (including valuers), and current/CC/OD accounts. |
| Section 20 BR Act (Foreign Banks) | General application of Section 20. | Clarifies that foreign bank branches in India must adhere to the spirit of Section 20 of BR Act, 1949, regarding lending where a director on their Board abroad has an interest. Paragraph 15 deleted, new Paragraph 15A inserted. |
| Government Entities | Unspecified or implied treatment. | Explicitly states that Government-owned/controlled entities are not related parties to a government bank purely due to common ownership. |
Reserve Bank of India (Small Finance Banks – Credit Risk Management) – Amendment Directions, 2026
Background
This circular, issued by the Reserve Bank of India (RBI) on January 05, 2026, amends the existing Reserve Bank of India (Small Finance Banks - Credit Risk Management) Directions, 2025. These amendments are made in the public interest, exercising powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949. The primary objective is to review and refine the credit risk management framework for Small Finance Banks (SFBs), with a particular focus on transactions involving "related parties."
Key Decision
The RBI has introduced significant modifications to enhance clarity and regulate lending practices for Small Finance Banks, especially concerning related parties. The key decisions include:
- Expanded Definitions: A comprehensive set of new and revised definitions has been introduced for terms like 'Committee on lending to related parties', 'Reciprocally Related Person', 'Related Party', 'Related Person', 'Lending' (in the context of related parties), 'Key Managerial Personnel (KMP)', 'Promoter', and 'Control', among others. These definitions aim to clearly delineate the scope of related party transactions.
- Enhanced Board Policy Requirements: SFBs are now mandated to include specific aspects related to lending to related parties, country risk management, unhedged foreign currency exposures, and valuation of properties in their Board-approved Credit Risk Management policy.
- Clarification on Statutory Restrictions (Section 20 of BR Act, 1949): Paragraph 15 of the original directions has been deleted. A new Paragraph 15A has been inserted, providing crucial explanations and exemptions to the provisions of Section 20(4) of the Banking Regulation Act, 1949. These exemptions specify conditions under which credit facilities to companies where a director has substantial interest, or to public trusts where a trustee is a director, or loans against government securities/LIC policies to a director, would not be subject to the general restrictions.
Exam Relevance
- Definitions of Related Parties: The circular introduces detailed definitions for 'Related Party', 'Reciprocally Related Person', 'Related Person', and 'Lending' in the context of related parties. Understanding the specific criteria (e.g., shareholder with more than ten per cent paid-up equity, control, nominee director power, acting on advice) and the nuances of these definitions is critical. Why it matters: Questions often test the precise definitions, thresholds, or components that define a 'related party' or 'related person' for SFBs.
- Committee on Lending to Related Parties: The concept of a dedicated 'Committee on lending to related parties' (a Board committee, not the Audit Committee) entrusted with sanctioning such loans is introduced. Why it matters: The role and constitution of such committees can be a direct question point.
- Scope of Board-Approved Policy: The updated requirement that the Board-approved Credit Risk Management policy must explicitly cover lending to related parties, country risk management, and unhedged foreign currency exposures. Why it matters: This highlights key areas of risk management that banks must address and can be asked as a 'what must be included' type question.
- Exemptions to BR Act, Section 20(4): New Paragraph 15A provides specific exemptions. These include credit facilities granted prior to a director's appointment (with conditions on non-renewal/enhancement), advances to public trusts where a trustee is also a bank director, and loans/advances to a director against government securities or life insurance policies. Why it matters: Understanding the conditions and specific types of transactions exempted from statutory lending restrictions is a high-yield area for questions, often focusing on the 'when' and 'how' of these exceptions.
- Circular Number and Date: The circular is RBI/2025-26/174 DOR.CRE.REC.375/07-02-002/2025-26 dated January 05, 2026. Why it matters: Staying updated with the latest circulars, their numbers, and effective dates is important for current affairs and banking awareness questions.
Summary Table
| Aspect | Before (2025 Directions) | After (2026 Amendments) |
|---|---|---|
| Focus | General Credit Risk Management | Enhanced focus on Related Party Lending & specific definitions |
| Key Definitions | Less granular for 'related parties' | Comprehensive new definitions for Related Party, Reciprocally Related Person, KMP, Lending to related parties, etc. |
| Board Policy Scope | General Credit Risk Management | Explicitly includes lending to related parties, country risk, unhedged forex, valuation. |
| BR Act Section 20(4) | Paragraph 15 (presumably restricting lending to directors/related parties) | Paragraph 15 deleted; New Paragraph 15A inserts specific exemptions to Section 20(4) restrictions. |
| Exemption Conditions | Not explicitly detailed for Section 20(4) | Details conditions for exemptions (e.g., prior to appointment, public trusts, against govt. securities/LIC policies). |
Forced ID 13251: Reserve Bank of India (Local Area Banks – Credit Risk Management) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) has issued amendments to its existing Reserve Bank of India (Local Area Banks - Credit Risk Management) Directions, 2025. These amendments, issued on January 05, 2026, under circular number RBI/2025-26/175, aim to strengthen the credit risk management framework for Local Area Banks (LABs). The primary focus is on bringing greater clarity and stricter norms regarding lending to 'related parties' and addressing potential conflicts of interest. These changes are introduced in exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949.
Key Decision
The key decision involves a comprehensive overhaul and insertion of new definitions for terms critical to identifying and managing risks associated with 'related party' transactions. This includes defining 'Related Party', 'Related Person', 'Reciprocally Related Person', 'Key Managerial Personnel (KMP)', 'Lending' in this context, and establishing a 'Committee on lending to related parties'. Furthermore, the circular modifies the requirements for Board-approved policies on credit risk management to explicitly cover related party lending, and clarifies the application of statutory restrictions under Section 20(4) of the Banking Regulation Act, 1949, by providing specific explanations and exemptions for certain types of loans to directors and related entities.
Exam Relevance
- Circular Date & Number: The circular date January 05, 2026, and number RBI/2025-26/175 are important for chronological awareness and specific identification. Why it matters for exam: Questions often test the latest circular dates or their identifiers.
- Applicable Act & Sections: The amendments are issued under Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters for exam: Knowing the regulatory powers under which RBI issues directions is a common area for questions.
- Target Entities: The directions specifically apply to Local Area Banks (LABs). Why it matters for exam: Understanding the scope of applicability of a circular is crucial.
- Definition of 'Related Party': A major focus is on new definitions. 'Related Party' includes entities where a related person or reciprocally related person has more than 10% of paid-up equity, or controls more than 20% of voting rights. Why it matters for exam: Specific percentages and criteria for defining 'related party' or 'related person' are frequently asked.
- Definition of 'Related Person': A person is 'Related' if they are a promoter, director, KMP of the bank, or own more than 5% of paid-up equity or voting rights. Why it matters for exam: Differentiating between 'related person' and 'related party' thresholds can be a tricky question.
- Definition of 'Reciprocally Related Person': This includes directors of other commercial banks, AIFIs, scheduled cooperative banks, or their subsidiaries, or trustees of mutual funds/AIFs established by such entities, and their relatives. Why it matters for exam: This new term and its scope could be directly tested.
- 'Lending' to Related Parties: Explicitly includes funded and non-fund-based credit, and investments in debt instruments of related parties. Crucially, equity investments are excluded. Why it matters for exam: Identifying what constitutes 'lending' in this context, especially the exclusion of equity investments, is a potential question.
- Committee on lending to related parties: This committee of the Board (other than the Audit Committee) is tasked with sanctioning loans to related parties. Why it matters for exam: The specific committee and its exclusion of the Audit Committee are points of interest.
- Board Approved Policies: Policies must now comprehensively cover lending to related parties, unhedged foreign currency exposures, and valuation of properties. Why it matters for exam: The specific areas mandated for inclusion in Board policies are important.
- Exemptions to Section 20(4) of BR Act: The circular provides explanations for cases not covered by paragraph 7 (which details restrictions on loans to directors). Key exemptions include:
- Credit facilities to companies where a director had substantial interest before their appointment to the bank's board (but renewal/enhancement/change is prohibited post-appointment).
- Advances to public trusts where a trustee is also a bank director.
- Loans to a director against government securities, life insurance policies, or fixed deposits, provided LTV is not in excess of 100% of realisable value or as per RBI norms.
- Personal loans to a director (excluding investment in financial assets) as per employee policy.
- Why it matters for exam: These specific exemptions and their conditions, especially the 100% LTV for certain securities and the restriction on renewal of pre-existing facilities, are high-yield questions.
Summary Table
| Aspect | Old Provision / Context (Prior to Amendments) | New Provision / Change (As per Amendment Directions, 2026) | Impact on Local Area Banks (LABs) |
|---|---|---|---|
| Definitions | Less comprehensive or absent specific definitions for 'related party' transactions. | New, detailed definitions introduced for: - 'Committee on lending to related parties' (Board committee, not Audit Committee). - 'Related Party': Includes entities where related person/reciprocally related person has >10% equity, >20% voting rights, or control. - 'Related Person': Promoter, director, KMP, or >5% equity/voting rights in the bank. - 'Reciprocally Related Person': Director of another bank/AIFI/co-op bank/subsidiary, or trustee of MF/AIF, and their relatives. - 'Lending' (to related parties): Includes funded/non-fund, debt instruments; excludes equity investments. |
Enhances clarity, standardizes identification of related parties, and ensures uniform application of restrictions, thereby strengthening governance. |
| Board Approved Policies | General credit risk management policy requirements. | Paragraph 5 replaced: Policy must be comprehensive and specifically cover aspects related to lending to related parties, unhedged foreign currency exposures, and valuation of properties. | Mandates specific inclusion of related party lending in policy, ensuring structured management of this risk. |
| Statutory Restrictions (Section 20 of BR Act) | Restrictions on loans/advances to directors/related entities, with some general explanations. | Paragraph 8 deleted, new paragraph 8A inserted with explicit explanations/exemptions to Section 20(4) for: - Pre-existing credit to companies where a director has substantial interest (cannot be renewed/enhanced/changed after director's appointment). - Advances to public trusts where trustee is a director. - Loans to a director against Gov. securities, LIC, FD up to 100% LTV or specific RBI norms. - Personal loans to a director (non-investment in financial assets) as per employee policy. |
Clarifies the scope of restrictions under Section 20(4), providing specific conditions for permissible lending to directors and related entities, thus reducing ambiguity and aiding compliance. |
Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2026
Background
This circular, issued by the Reserve Bank of India (RBI) on January 05, 2026, amends the existing Reserve Bank of India (Regional Rural Banks - Credit Risk Management) Directions, 2025. It is issued under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, with a focus on strengthening credit risk management for Regional Rural Banks (RRBs).
Key Decision
The RBI has significantly enhanced and clarified the framework for credit risk management in RRBs, particularly by providing exhaustive definitions for "related parties" and outlining specific guidelines for Board-approved policies and statutory restrictions concerning lending to such parties and other key credit aspects.
Exam Relevance
- Circular Date & Number: The circular was issued on January 05, 2026, with circular number RBI/2025-26/176. Exam Insight: Recent circular dates and numbers are frequently asked, especially for major policy amendments.
- Applicability: These directions specifically apply to Regional Rural Banks (RRBs). Exam Insight: Knowing the scope of applicability (which type of bank or institution) is a common question type.
- Related Party Lending Definitions: The circular introduces comprehensive definitions for 'Related Party', 'Related Person', and 'Reciprocally Related Person'. A 'Related Party' includes entities where a related/reciprocally related person is a partner, KMP, director, promoter, has >10% equity, >20% voting rights, or control. A 'Related Person' includes promoters, directors, KMPs of the bank, or persons owning >5% equity/voting rights. A 'Reciprocally Related Person' includes directors of other banks/AIFIs/scheduled cooperative banks/subsidiaries of commercial banks, or trustees of mutual funds/AIFs established by these entities, and their relatives (excluding independent/nominee directors appointed by Government/RBI/statutory body). Exam Insight: Detailed definitions, especially specific thresholds (e.g., 10% equity, 20% voting rights, 5% equity/voting rights), are high-yield questions, often presented in scenario-based formats.
- Scope of 'Lending' to Related Parties: 'Lending' in this context includes investments in debt instruments of related parties but excludes equity investments. Exam Insight: This clear distinction between debt and equity for 'lending' purposes is an important conceptual point.
- Exclusions for Related Party Definition: Government of India / State Government-owned or controlled entities are not treated as related parties to a government-owned bank solely due to common ownership or control. Exam Insight: Specific exclusions are critical for identifying exceptions to general rules.
- Mandatory Board Policy Inclusions: The Board-approved Credit Risk Management policy for RRBs must now explicitly cover aspects related to lending to related parties, valuation of properties (including empanelment of valuers), and opening of current accounts and CC / OD accounts. Exam Insight: Questions can test the mandatory components of Board-approved policies.
- Exemptions for Director-Related Advances (Para 8A): Certain advances previously restricted under Section 20(4) of the Banking Regulation Act, 1949, are now clarified as permissible under specific conditions:
- Credit facilities granted to a company where a director had substantial interest prior to their appointment to the bank's Board. Condition: The facility cannot be renewed, enhanced, or have its terms changed after the director's appointment until directorship is relinquished.
- Advances to a public trust where a trustee is also a director of the lending bank.
- Loans and advances to a director against specific securities (government securities, life insurance policies, or fixed deposit) where the Loan-to-Value (LTV) ratio does not exceed 100% of the realisable value, or adheres to specifically prescribed LTV/valuation norms. Exam Insight: Focus on these specific exemptions, the conditions attached to them, and numerical thresholds like the 100% LTV for specific collateral.
Summary Table
| Aspect | Key Change/Detail | Exam Point Focus |
|---|---|---|
| Circular Number & Date | RBI/2025-26/176 on January 05, 2026 | Direct question on circular identification. |
| Applicability | Exclusively for Regional Rural Banks (RRBs) | Identify regulated entities. |
| Key Definitions | Comprehensive definitions for 'Related Party', 'Related Person', and 'Reciprocally Related Person' including specific equity/voting thresholds (e.g., 10%, 20%, 5%). | Definitional clarity, numerical thresholds, scenario-based identification. |
| Lending Scope | Lending to related parties includes debt instruments, excludes equity investments. | Distinction between included and excluded financial instruments. |
| Board Policy | Mandatory inclusion of lending to related parties, property valuation, and current/CC/OD account opening in Credit Risk Management policy. | Essential components of Board-approved policies. |
| Director Loan Exemptions | Specific exemptions for advances to companies (pre-appointment), public trusts, and directors against Govt. securities, LIC, FD with LTV up to 100%. Conditions apply (e.g., no renewal/enhancement post-appointment for pre-existing loans). | Conditions for exemptions, specific LTV limits (100%), and types of eligible collateral. |
Reserve Bank of India (Urban Co-operative Banks – Credit Risk Management) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) has issued amendments to its existing Directions on Credit Risk Management for Urban Co-operative Banks (UCBs) from 2025. These new directions, effective January 05, 2026, primarily focus on strengthening the regulatory framework concerning lending to related parties and managing potential conflicts of interest within UCBs. The amendments are issued under the powers conferred by Sections 21 and 35A read with Section 56 of the Banking Regulation Act, 1949.
Key Decision
The circular introduces comprehensive definitions for various terms related to "persons" and "entities" associated with UCBs, specifically clarifying "Related Party," "Related Person," and "Reciprocally Related Person." It mandates UCBs to implement a robust Board-approved Credit Risk Management policy covering these aspects. Furthermore, it reiterates and clarifies the statutory restrictions under Section 20(1)(b) of the Banking Regulation Act, 1949, regarding advances to directors and their associated entities, while also specifying certain exemptions to these prohibitions.
Exam Relevance
- Circular Applicability: This circular specifically applies to Urban Co-operative Banks (UCBs). Exam Insight: Questions often test the applicability of regulations to different types of banks.
- Key Definitions - Shareholding Thresholds:
- A 'Related Person' includes someone owning more than five per cent of paid-up equity share capital or jointly exercising more than five per cent voting rights.
- A 'Related Party' includes entities where a related person or reciprocally related person is a shareholder with more than ten per cent of paid-up equity share capital, or controls more than twenty per cent of voting rights.
- Exam Insight: Exact percentage thresholds like 5%, 10%, and 20% for shareholding or voting rights are common numerical questions.
- Definition of 'Related Party' Components: Understand the specific categories like 'Reciprocally Related Person' (director/BoM of another Co-operative bank, their relatives, associated firms) and the extensive list of scenarios defining a 'Related Party' (partner, manager, KMP, director, promoter, controller, guarantor, trustee, subsidiary/parent relationships). Exam Insight: These detailed definitions are crucial for scenario-based questions or direct recall of components.
- Lending to Related Parties (Definition): 'Lending' to related parties includes funded and non-fund-based credit facilities, and investments in debt instruments, but specifically excludes equity investments. Exam Insight: This specific inclusion/exclusion is a fine detail often tested to check understanding of the scope.
- Board Approved Policy: UCBs must have a comprehensive Board approved policy on Credit Risk Management, explicitly covering lending to related parties, property valuation, and credit facility review/renewal. Exam Insight: The mandatory nature of a Board policy and its core components are important administrative/governance questions.
- Statutory Restriction (Section 20(1)(b) BR Act): Be aware of the general prohibition on UCBs granting loans/advances to their directors, or entities where their directors have an interest (partner, manager, employee, guarantor, substantial interest). Exam Insight: Knowledge of key sections of the Banking Regulation Act, especially those related to restrictions, is vital.
- Exemptions to Restrictions: The circular starts to list exemptions, such as credit facilities granted prior to a director's appointment if the director subsequently acquires substantial interest. Exam Insight: Understanding exceptions to general rules is equally important as the rules themselves.
Summary Table
| Aspect | Details |
|---|---|
| Circular Number & Date | RBI/2025-26/177 DOR.CRE.REC.378/07-02-005/2025-26, January 05, 2026 |
| Applicability | Urban Co-operative Banks (UCBs) |
| Core Subject | Credit Risk Management - Amendment Directions, focusing on Related Parties and Advances to Directors |
| Key Definitions Introduced/Amended | 'Contract or arrangement', 'Control', 'Director of a UCB', 'Entity', 'Key Managerial Personnel (KMP)', 'Lending' (related party), 'Person', 'Personal Loan', 'Promoter', 'Reciprocally Related Person', 'Related Party', 'Related Person', 'Specified employees', 'Relative' |
| Key Thresholds | Related Person: >5% equity/voting rights. Related Party: >10% equity, >20% voting rights |
| Lending to Related Parties | Covers funded/non-fund-based credit, includes debt investments, excludes equity investments |
| Mandatory Policy | UCBs must have a Board-approved Credit Risk Management policy covering related party lending, valuation, credit review/renewal. |
| Statutory Restrictions | Reiterates Section 20(1)(b) of BR Act, 1949 prohibiting advances to directors and their associated entities. |
| Clarified Exemptions | Begins outlining specific cases where Section 20(1)(b) prohibition would not apply (e.g., credit granted before director's appointment). |
Reserve Bank of India (Non-Banking Financial Companies – Credit Risk Management) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) regularly reviews and updates its regulatory framework to ensure sound financial practices. This circular, dated January 05, 2026, introduces amendments to the existing Reserve Bank of India (Non-Banking Financial Companies - Credit Risk Management) Directions, 2025. The aim is to strengthen the governance and risk management practices of Non-Banking Financial Companies (NBFCs), particularly concerning their lending activities to 'related parties'. These amendments are issued under powers conferred by the RBI Act, 1934, National Housing Bank Act, 1987, and Factoring Regulation Act, 2011.
Key Decision
The RBI has issued comprehensive amendments to enhance credit risk management for NBFCs, specifically focusing on 'Lending to Related Parties'. Key changes include:
- Refined Applicability: Certain critical paragraphs (6 through 8) of the Directions will now exclusively apply to 'Notified NBFCs'.
- Extensive Definitions: New and crucial definitions have been inserted, covering terms like 'Committee on lending to related parties', 'Contract or arrangement', 'Control', 'Director of an NBFC', 'Entity', 'Key Managerial Personnel (KMP)', 'Lending' (specifically excluding equity investments for related parties), 'Person', 'Personal Loans' (excluding investments in financial assets), 'Promoter', 'Related Party', 'Related Person', and 'Specified employees'. These definitions align with relevant acts like the Companies Act, 2013, and IBC, 2016.
- Structured Policy Framework: Existing sections relating to related party lending have been deleted and replaced with a new comprehensive framework (Section A.3) titled 'General Principles on Lending to Related Parties'.
- Board's Responsibility: The Board of the NBFC is now explicitly responsible for establishing and overseeing suitable mechanisms for the implementation of the policy on lending to related parties.
- Credit Policy Mandates: NBFCs' credit policies must now contain specific provisions for 'lending to related parties' and also for 'lending to Specified employees' and their relatives. These policies must include additional safeguards.
- Whistleblowing Mechanism: Policies are encouraged to incorporate a whistleblowing mechanism for reporting concerns about irregular or unethical related party loans, aiming to eliminate quid pro quo arrangements.
- Aggregate Limits: The policy must specify aggregate limits for loans to related parties, with sub-limits for single and group related parties, all within existing prudential exposure limits.
- Materiality Thresholds: Crucially, credit facilities to related parties, including personal loans to directors or KMPs, are now subject to specific materiality thresholds based on the NBFC's layer:
- For Upper Layer and Top Layer NBFCs: ₹10 crore
- For Middle Layer NBFCs: ₹5 crore
- For Base Layer NBFCs: ₹1 crore
Exam Relevance
- Circular Details: Note the circular number RBI/2025-26/179 DOR.CRE.REC.380/07-02-008/2025-26 and date January 05, 2026. Why it matters for exam: Basic identification questions often test circular numbers and dates.
- Applicability: The core subject is Non-Banking Financial Companies (NBFCs). Note that paragraphs 6-8 now apply exclusively to 'Notified NBFCs'. Why it matters for exam: Knowing the regulated entity and specific applicability is fundamental for policy-based questions.
- Key Definitions: Understand the nuanced definitions of "Related Party" (e.g., shareholder > 10% equity, voting rights > 20%, control), "Related Person" (promoter, director, KMP, > 5% equity/voting rights), "Key Managerial Personnel (KMP)", "Lending" (excludes equity investments in related parties), and "Personal Loans" (excludes loans for investments in financial assets), "Specified employees". Why it matters for exam: Definitions are frequently tested, especially the thresholds and exclusions.
- Materiality Thresholds: Memorize the specific thresholds for credit facilities to related parties:
- Upper Layer and Top Layer NBFCs: ₹10 crore
- Middle Layer NBFCs: ₹5 crore
- Base Layer NBFCs: ₹1 crore
- Why it matters for exam: These specific monetary limits are high-yield questions for all banking exams.
- Credit Policy Mandates: The Board has overall responsibility. Credit policies must include specific provisions for lending to related parties and specified employees, aggregate limits, and a whistleblowing mechanism. Why it matters for exam: Questions on governance, internal controls, and policy requirements are common.
- Enabling Powers: The amendments are issued under Sections 45JA, 45L, 45M of the RBI Act, 1934; Sections 30A, 32 of the National Housing Bank Act, 1987; and Section 6 of the Factoring Regulation Act, 2011. Why it matters for exam: The specific sections of acts granting power to RBI for regulation are often asked.
Summary Table
| Aspect | Old Provision (Implicit/General) | New/Amended Provision |
|---|---|---|
| Focus of Directions | General credit risk management for NBFCs. | Specific and detailed framework for Lending to Related Parties to enhance transparency and reduce conflicts of interest. |
| Key Definitions | Less detailed or absent for related party concepts. | Introduced comprehensive definitions: Related Party, Related Person, Key Managerial Personnel (KMP), Lending (to related parties, excludes equity investments), Personal Loans (excludes investments in financial assets), Specified employees, etc., often aligning with Companies Act/IBC definitions. |
| Credit Policy Requirements | General credit policy requirements. | Mandates specific provisions for Lending to Related Parties and Specified employees and their relatives within the credit policy. Requires additional safeguards, aggregate limits, sub-limits, and encourages a whistleblowing mechanism for reporting concerns related to such loans. |
| Materiality Thresholds | Not explicitly defined for related party lending based on NBFC layers. | Introduced explicit thresholds for credit facilities (including personal loans to directors/KMPs) to related parties based on NBFC's regulatory layer: \n- Upper Layer & Top Layer NBFCs: ₹10 crore \n- Middle Layer NBFCs: ₹5 crore \n- Base Layer NBFCs: ₹1 crore |
| Applicability (Paragraphs 6-8) | General applicability. | Now applicable exclusively to 'Notified NBFCs', indicating a targeted regulatory approach for significant NBFCs. |
Reserve Bank of India (All India Financial Institutions – Credit Risk Management) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews its regulatory framework to ensure sound financial practices. These Amendment Directions, issued on January 05, 2026, build upon the existing "Reserve Bank of India (All India Financial Institutions - Credit Risk Management) Directions, 2025". The primary objective is to strengthen the credit risk management framework for All India Financial Institutions (AIFIs), particularly focusing on preventing potential conflicts of interest in lending operations involving related parties and directors.
Key Decision
The RBI has significantly enhanced and clarified the regulatory landscape for AIFIs concerning credit risk management, especially in the context of connected lending. The key decisions include:
- Expanded Definitions: Introducing comprehensive and precise definitions for critical terms like 'Related Party', 'Reciprocally Related Person', 'Related Person', 'Lending' (in related party context), 'KMP', and 'Control', drawing heavily from the Companies Act, 2013 and IBC, 2016.
- Mandatory Board Policy: Making it mandatory for AIFIs to have a comprehensive Board-approved policy covering aspects like lending to related parties, Legal Entity Identifier (LEI), filing of security interest, and restrictions on revolving credit facilities.
- Explicit Restrictions: Deleting the old 'Connected Lending' chapter and inserting a new 'Regulatory Restrictions' chapter, which explicitly prohibits AIFIs from granting loans against their own shares and imposes stringent restrictions on granting loans or advances to their own directors and entities/individuals connected to them, to mitigate conflicts of interest.
Exam Relevance
- Circular Date & Number: The circular was issued on January 05, 2026, with circular number RBI/2025-26/180. Why it matters for exam: Knowing the latest update dates and identifying circular numbers are common questions for current affairs and banking awareness sections.
- Applicability: These directions are applicable to All India Financial Institutions (AIFIs). Why it matters for exam: Questions often test the scope or entities covered by specific RBI regulations.
- Key Definitions: Focus on the precise definitions of 'Related Party', 'Reciprocally Related Person', and 'Related Person'. Understanding who falls into these categories, especially the criteria for shareholding (>10% for 'Related Party' entity, >5% for 'Related Person' voting rights/ownership in AIFI) or control, is vital. Why it matters for exam: Direct questions on these definitions, including thresholds, inclusions, and exclusions, are highly probable.
- Exclusion for Government Entities: Government of India/State Government-owned or controlled entities are not treated as related parties to an AIFI solely due to common government ownership or control. Why it matters for exam: This is a critical nuance and a likely trap question.
- Scope of 'Lending': 'Lending' in the context of 'related party' includes investments in debt instruments but excludes equity investments. Why it matters for exam: Understanding the precise scope of transactions covered is important for definitional clarity.
- Prohibition on Own Shares: An AIFI cannot grant any loans and advances on the security of its own shares. Why it matters for exam: This is a direct and absolute prohibition, easily testable.
- Restrictions on Director Loans: Know the explicit prohibitions on lending to directors, firms where they are interested (as Partner, Manager, Employee, Guarantor), and certain companies/individuals connected to them. Remember the exclusions like AIFI's own subsidiary, Section 8 companies, or Government Companies from the company restriction. Why it matters for exam: These specific restrictions aim to prevent conflicts of interest and are frequently examined.
- Board Policy Mandate: AIFIs must have a comprehensive Board approved policy covering specific areas like lending to related parties, LEI, security interest, and revolving credit. Why it matters for exam: Questions on governance and mandatory policy requirements are common.
Summary Table: Key Amendments for AIFIs
| Aspect | Before (General Principles/Earlier Directions) | After (New/Amended Directions - Post Jan 5, 2026) |
|---|---|---|
| Applicability | All India Financial Institutions (AIFIs) | All India Financial Institutions (AIFIs) |
| Related Party Definitions | General understanding | Detailed, explicit definitions for 'Related Party', 'Reciprocally Related Person', 'Related Person', 'Lending', 'KMP', 'Control', etc., drawing from Companies Act & IBC. |
| Board Policy | General credit risk management policies | Mandates a comprehensive Board-approved policy specifically covering lending to related parties, Legal Entity Identifier (LEI), filing of security interest, and restrictions on revolving credit facilities. |
| Lending Against Own Shares | Implied/not explicitly detailed | Strictly Prohibited: An AIFI cannot grant any loans and advances on the security of its own shares. |
| Lending to Directors/Connected Entities | General conflict of interest guidelines | Explicit and stringent restrictions: Prohibits loans to directors, firms where directors are interested, certain companies (unless subsidiary/Section 8/Govt company) where directors have roles/substantial interest, and individuals for whom directors are partners/guarantors. |
| Government Entities | - | Clarification: Government-owned or controlled entities are not treated as related parties to an AIFI solely due to common government ownership/control. |
| Scope of 'Lending' for Related Parties | General credit facilities | Defined to include investments in debt instruments of related parties but exclude equity investments. |
Forced ID 13257: RBI (Commercial Banks – Financial Statements: Presentation and Disclosures) – Second Amendment Directions, 2026
Background
This circular, issued on January 05, 2026, refers to the existing Reserve Bank of India (Commercial Banks - Financial Statements: Presentation and Disclosures) Directions, 2025. It introduces amendments to these directions. The need for these amendments arose from a review consequent to the issuance of the Reserve Bank of India (Commercial Banks – Credit Risk Management) – Amendment Directions, 2026. Essentially, changes in credit risk management necessitated corresponding updates in how banks disclose their financial information.
Key Decision
The Reserve Bank of India, exercising its powers under Sections 21 and 35A of the Banking Regulation Act, 1949, has mandated new disclosure requirements for commercial banks. These amendments modify Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’.
A new sub-sub paragraph (ix) is inserted under sub-paragraph 10(5) on ‘Exposures’, requiring banks to disclose detailed information regarding 'Exposures to Related Parties'. This disclosure must adhere to the definition of related parties as per the Reserve Bank of India (Commercial Banks – Credit Risk Management) Directions, 2025.
The specific details to be disclosed are:
A. Loans to Related Parties
- Aggregate value of loans sanctioned to related parties during the year.
- Aggregate value of outstanding loans to related parties as on 31st March.
- Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on 31st March.
- Aggregate value of outstanding loans to related parties which are categorized as: (i) Special Mention Accounts (SMA) as on 31st March (ii) Non-Performing Assets (NPA) as on 31st March
- Amount of provisions held in respect of loans to related parties as on 31st March.
B. Contracts and Arrangements involving Related Parties 6. Aggregate value of contracts and arrangements awarded to related parties during the year. 7. Aggregate value of outstanding contracts and arrangements involving related parties as on 31st March.
These amendments will come into force from April 1, 2026. However, banks have the option to implement them earlier.
Exam Relevance
- Effective Date: The new disclosure norms become effective from April 1, 2026. Why it matters: Questions may ask for the specific date when these amendments come into force.
- Key Disclosure Area: Banks are now required to disclose detailed 'Exposures to Related Parties'. Why it matters: Understanding what information needs to be disclosed is crucial. The different categories (loans, contracts, SMA, NPA) are potential question points.
- Legal Authority: The RBI issued these directions under Sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters: Regulatory powers and the specific sections of acts are frequently tested, especially in legal/banking awareness sections.
- Definition Reference: 'Related Parties' definition is drawn from the Reserve Bank of India (Commercial Banks – Credit Risk Management) Directions, 2025. Why it matters: This highlights the interconnectedness of different RBI regulations and could be a trick question on where the definition is sourced from.
Summary Table: Related Party Exposure Disclosure Requirements
| Sl No. | Particulars | Previous Year | Current Year |
|---|---|---|---|
| A. Loans to Related Parties | |||
| 1 | Aggregate value of loans sanctioned to related parties during the year | ||
| 2 | Aggregate value of outstanding loans to related parties as on 31st March | ||
| 3 | Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on 31st March | ||
| 4 | Aggregate value of outstanding loans to related parties which are categorized as: | ||
| (i) Special Mention Accounts (SMA) as on 31st March | |||
| (ii) Non-Performing Assets (NPA) as on 31st March | |||
| 5 | Amount of provisions held in respect of loans to related parties as on 31st March | ||
| B. Contracts and Arrangements involving Related Parties | |||
| 6 | Aggregate value of contracts and arrangements awarded to related parties during the year | ||
| 7 | Aggregate value of outstanding contracts and arrangements involving related parties as on 31st March |
Reserve Bank of India (Small Finance Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
Previously, the Reserve Bank of India (RBI) had issued directions in 2025 concerning the presentation and disclosures in the financial statements of Small Finance Banks (SFBs). Following further amendments issued in 2026 regarding Credit Risk Management for SFBs, the RBI has now introduced modifications to the disclosure requirements to ensure consistency and enhance transparency.
Key Decision
On January 05, 2026, the RBI issued amendment directions requiring Small Finance Banks (SFBs) to disclose detailed information about their 'Exposures to Related Parties' in their financial statements. This new disclosure aims to provide a comprehensive view of dealings with entities connected to the bank.
Specifically, SFBs must now report the following under 'Notes to Accounts' related to 'Exposures':
- Aggregate value of loans sanctioned to related parties during the year.
- Aggregate value of outstanding loans to related parties as on March 31.
- Outstanding loans to related parties as a proportion of total credit exposure as on March 31.
- Outstanding loans to related parties categorized as Special Mention Accounts (SMA) and Non-Performing Assets (NPA) as on March 31.
- Amount of provisions held in respect of loans to related parties as on March 31.
- Aggregate value of contracts and arrangements awarded to related parties during the year.
- Aggregate value of outstanding contracts and arrangements involving related parties as on March 31.
These amendments will come into force from April 1, 2026, though banks have the discretion to implement them earlier.
Exam Relevance
- Applicability: These directions specifically apply to Small Finance Banks (SFBs). Exam Insight: Questions often focus on the specific type of financial institution affected by a new regulation.
- Key Disclosure: The mandatory disclosure of 'Exposures to Related Parties' in financial statements is a crucial change. Exam Insight: Understanding what new information banks must disclose is a common question type.
- Details of Disclosure: Knowledge of the specific items to be disclosed, such as outstanding loans, SMA/NPA classification, and provisions for related party exposures, is important. Exam Insight: Be prepared for questions that list disclosure items and ask which one is not required, or which is required.
- Effective Date: The amendments come into force from April 1, 2026. Exam Insight: Dates of implementation for new regulations are frequently tested.
- Regulatory Basis: The RBI issues these directions under sections 21 and 35A of the Banking Regulation Act, 1949. Exam Insight: Knowing the relevant sections of key banking acts under which RBI operates is essential for static banking awareness and current affairs.
Summary Table: Key Disclosures for SFBs
| Sl No. | Particulars (Exposures to Related Parties) | Disclosure Requirement |
|---|---|---|
| 1. | Loans sanctioned during the year | Aggregate value |
| 2. | Outstanding loans (as on March 31) | Aggregate value |
| 3. | Outstanding loans as % of total credit | Proportion |
| 4. | Outstanding loans categorized as SMA | Aggregate value |
| 5. | Outstanding loans categorized as NPA | Aggregate value |
| 6. | Provisions held (as on March 31) | Amount |
| 7. | Contracts/Arrangements awarded | Aggregate value |
| 8. | Outstanding Contracts/Arrangements | Aggregate value |
Reserve Bank of India (Local Area Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
This circular, issued on January 05, 2026, by the Reserve Bank of India (RBI), introduces amendments to the existing Reserve Bank of India (Local Area Banks - Financial Statements: Presentation and Disclosures) Directions, 2025. The primary motivation for these changes stems from a review conducted consequent to the issuance of the Reserve Bank of India (Local Area Banks – Credit Risk Management) – Amendment Directions, 2026. These amendments are issued under the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, aiming to enhance transparency and strengthen risk management concerning related party transactions within Local Area Banks (LABs).
Key Decision
The RBI has modified the Directions by inserting a new sub-sub paragraph (ix) under sub-paragraph 10(5) on ‘Exposures’ in Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’. This new provision mandates Local Area Banks to disclose detailed information regarding their Exposures to Related Parties.
The disclosure requirements include:
-
Loans to Related Parties:
- Aggregate value of loans sanctioned during the year.
- Aggregate value of outstanding loans as on 31st March.
- Outstanding loans as a proportion of total credit exposure as on 31st March.
- Outstanding loans categorized as Special Mention Accounts (SMAs) and Non-Performing Assets (NPAs) as on 31st March.
- Amount of provisions held against these loans as on 31st March.
-
Contracts and Arrangements involving Related Parties:
- Aggregate value of contracts and arrangements awarded during the year.
- Aggregate value of outstanding contracts and arrangements as on 31st March.
These disclosures are to be presented in a specified table format (in ₹ crore) and are crucial for providing stakeholders with a clearer picture of potential conflict of interest and risk concentrations arising from related party transactions. The definition of 'Related Parties' is as specified in the Reserve Bank of India (Local Area Banks – Credit Risk Management) Directions, 2025.
These amendments will come into force from April 1, 2026, though banks have the option to implement them earlier.
Exam Relevance
- Applicable Entities: These directions specifically apply to Local Area Banks (LABs). Exam Insight: Questions often test the specific type of financial institution affected by a new regulation, differentiating between various banking categories.
- New Disclosure Requirement: LABs must now disclose Exposures to Related Parties in their financial statements, under Chapter-III 'Disclosure in Financial Statements – Notes to Accounts', sub-paragraph 10(5)(ix). Exam Insight: The specific details of what needs to be disclosed (e.g., aggregate value of loans sanctioned, outstanding, SMA/NPA categorization, provisions, and related contracts/arrangements) can be potential multiple-choice questions.
- Definition Source: The definition of 'Related Parties' is linked to the Reserve Bank of India (Local Area Banks – Credit Risk Management) Directions, 2025. Exam Insight: Cross-referencing between circulars for definitions is a subtle but important point that could be tested.
- Effective Date: These amendments come into force from April 1, 2026. Exam Insight: Key dates of implementation for regulatory changes are frequently tested, especially if banks have the option for earlier adoption.
- Legal Basis: The powers are conferred by Sections 21 and 35A of the Banking Regulation Act, 1949. Exam Insight: Knowing the relevant sections of banking acts under which RBI issues directions is important for regulatory compliance topics.
Summary Table
| Sl No. | Particulars | Previous Year | Current Year |
|---|---|---|---|
| A. Loans to Related Parties | |||
| 1 | Aggregate value of loans sanctioned to related parties during the year | ||
| 2 | Aggregate value of outstanding loans to related parties as on 31st March | ||
| 3 | Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on 31st March | ||
| 4 | Aggregate value of outstanding loans to related parties which are categorized as: | ||
| (i) Special Mention Accounts as on 31st March | |||
| (ii) Non-Performing Assets as on 31st March | |||
| 5 | Amount of provisions held in respect of loans to related parties as on 31st March | ||
| B. Contracts and Arrangements involving Related Parties | |||
| 6 | Aggregate value of contracts and arrangements awarded to related parties during the year | ||
| 7 | Aggregate value of outstanding contracts and arrangements involving related parties as on 31st March |
Reserve Bank of India (Regional Rural Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
This circular, issued by the Reserve Bank of India (RBI), amends the existing "Reserve Bank of India (Regional Rural Banks - Financial Statements: Presentation and Disclosures) Directions, 2025". The amendment is a direct consequence of the issuance of new directions related to "Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2026". The RBI, exercising its powers under sections 21 and 35A of the Banking Regulation Act, 1949, deemed this necessary and expedient in the public interest to enhance transparency and risk management in Regional Rural Banks (RRBs).
Key Decision
The core decision of this amendment is to introduce new mandatory disclosure requirements for Regional Rural Banks (RRBs) regarding their 'Exposures to Related Parties'.
Specifically, a new sub-sub-paragraph (ix) has been inserted under sub-paragraph 10(5) on ‘Exposures’ in Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’. This requires RRBs to disclose detailed information about transactions with 'related parties', as defined in the Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025.
The disclosures must be presented in a specific table format and include:
-
A. Loans to Related Parties
- Aggregate value of loans sanctioned during the year.
- Aggregate value of outstanding loans as on 31st March.
- Outstanding loans as a proportion of total credit exposure as on 31st March.
- Outstanding loans categorized as:
- Special Mention Accounts (SMAs) as on 31st March.
- Non-Performing Assets (NPAs) as on 31st March.
- Amount of provisions held for related party loans as on 31st March.
-
B. Contracts and Arrangements involving Related Parties 6. Aggregate value of contracts and arrangements awarded during the year. 7. Aggregate value of outstanding contracts and arrangements as on 31st March.
These amendments shall come into force from April 1, 2026. However, banks have the option to implement them earlier.
Exam Relevance
- Purpose of Amendment: This circular emphasizes the RBI's focus on transparency and governance in RRBs, especially concerning related party transactions. Why it matters: Questions often probe the rationale behind regulatory changes, linking them to broader goals like financial stability or risk mitigation.
- Applicability & Effective Date: The directions are specifically for Regional Rural Banks (RRBs) and are effective from April 1, 2026. Why it matters: Exam questions frequently test the scope of applicability (which type of banks) and the precise effective dates of new regulations.
- Key Disclosures: The specific items required for disclosure related to 'Exposures to Related Parties' are critical. These include loans sanctioned, outstanding amounts, their proportion to total credit, classification into SMAs/NPAs, provisions, and details of other contracts/arrangements. Why it matters: A question might list several items and ask which one is NOT required for disclosure, or ask for the reporting period (e.g., as on 31st March).
- Regulatory Power: The amendment is issued under sections 21 and 35A of the Banking Regulation Act, 1949. Why it matters: Knowledge of the specific sections of banking acts under which RBI issues directions is a common area for direct questions.
Summary Table
| Feature | Before (Directions, 2025) | After (Amendment Directions, 2026) |
|---|---|---|
| Related Party Disclosures | No specific comprehensive disclosure requirements for 'Exposures to Related Parties' in financial statements. | Mandatory, detailed disclosures on related party loans and contracts in 'Notes to Accounts'. |
| Effective Date | N/A (amendment addition) | April 1, 2026 (banks may implement earlier). |
| Reporting Items | N/A | Includes aggregate loans, outstanding loans, proportion to total credit, SMAs/NPAs, provisions, and contracts/arrangements with related parties. |
| Applicability | Regional Rural Banks (RRBs) | Regional Rural Banks (RRBs) |
Reserve Bank of India (Rural Co-operative Banks – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
This circular, dated January 05, 2026, amends the existing Reserve Bank of India (Rural Co-operative Banks – Financial Statements: Presentation and Disclosures) Directions, 2025. The amendment is a direct consequence of new directions issued regarding credit risk management for rural co-operative banks. Its primary objective is to enhance transparency and ensure comprehensive disclosure of financial information by these banks.
Key Decision
The Reserve Bank of India has mandated that Rural Co-operative Banks (RCBs) must now specifically disclose their Exposures to Related Parties in their financial statements. This new requirement is introduced by inserting a new sub-sub paragraph (viii) under sub-paragraph 10(5) in Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’. The disclosures must include details about both loans to related parties and contracts/arrangements involving related parties, covering aspects like sanctioned amounts, outstanding balances, asset classification (SMA/NPA), and provisions held.
Exam Relevance
- Applicability: This amendment specifically targets Rural Co-operative Banks. Why it matters for exam: Questions might test which type of banks are subject to these disclosure norms.
- Effective Date: The amendments come into force from April 1, 2026. Why it matters for exam: Exact dates of implementation are frequently asked, especially when they mark a significant change.
- Key Disclosure: The core change is the mandatory disclosure of Exposures to Related Parties. Why it matters for exam: Understanding what new information needs to be disclosed is crucial.
- Disclosure Categories: Banks must provide granular details on loans sanctioned, outstanding loans, outstanding loans as a proportion of total credit exposure, outstanding loans classified as Special Mention Accounts (SMAs) or Non-Performing Assets (NPAs), and provisions held. Additionally, contracts and arrangements with related parties must be disclosed. Why it matters for exam: The specific categories and metrics required for disclosure could be tested.
- Governing Sections: The powers for this directive are conferred by Sections 35A read with Section 56 of the Banking Regulation Act, 1949. Why it matters for exam: Legal provisions empowering RBI are important, foundational knowledge.
Summary Table
| Particulars | Details |
|---|---|
| Circular Number | RBI/2025-26/186 DOR.CRE.REC.387/21-04-018/2025-26 |
| Date of Issue | January 05, 2026 |
| Applicability | Rural Co-operative Banks (RCBs) |
| Key Change | Mandatory disclosure of Exposures to Related Parties in financial statements. |
| New Disclosure Requirement | Insertion of new sub-sub paragraph 10(5)(viii) under Chapter-III ‘Disclosure in Financial Statements – Notes to Accounts’ on Exposures. |
| Details to be Disclosed (Loans) | Aggregate value of loans sanctioned, outstanding loans, proportion of total credit exposure, loans categorized as SMA or NPA, and provisions held for related parties (all as on 31st March). |
| Details to be Disclosed (Contracts) | Aggregate value of contracts/arrangements awarded and outstanding contracts/arrangements involving related parties (all as on 31st March). |
| Effective Date | April 1, 2026 (banks may implement earlier). |
| Legal Powers | Sections 35A read with Section 56 of the Banking Regulation Act, 1949. |
Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Amendment Directions, 2026
Circular Number: RBI/2025-26/187 DOR.CRE.REC.388/21.04.018/2025-26 Date: January 05, 2026
Background
The Reserve Bank of India (RBI) periodically reviews its regulations to enhance transparency and strengthen financial stability. This circular introduces amendments to the existing Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Directions, 2025. The need for this amendment arose from a prior issuance of the Reserve Bank of India (Non-Banking Financial Companies – Credit Risk Management) – Amendment Directions, 2026, implying a need for alignment in disclosure practices related to credit risk management and related parties.
Key Decision
This amendment mandates Non-Banking Financial Companies (NBFCs) to provide detailed disclosures regarding their exposures to related parties in their financial statements, specifically within the ‘Notes to Accounts’ section (Chapter-III, sub-paragraph 21(9A)).
The new disclosures require NBFCs to report:
A. Loans to Related Parties:
- Aggregate value of loans sanctioned to related parties during the year.
- Aggregate value of outstanding loans to related parties as on March 31.
- Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on March 31.
- Aggregate value of outstanding loans to related parties categorized as:
- Special Mention Accounts (SMAs) as on March 31.
- Non-Performing Assets (NPAs) as on March 31.
- Amount of provisions held in respect of loans to related parties as on March 31.
B. Contracts and Arrangements involving Related Parties:
- Aggregate value of contracts and arrangements awarded to related parties during the year.
- Aggregate value of outstanding contracts and arrangements involving related parties as on March 31.
These disclosures will enhance transparency and provide a clearer picture of NBFCs' dealings with their related entities, aiding in better risk assessment.
Exam Relevance
- Effective Date: The amendments will come into force from April 1, 2026. Why it matters for exam: Questions often focus on the effective date of new regulations.
- Applicability: These new disclosure norms are applicable to Non-Banking Financial Companies (NBFCs). Why it matters for exam: Identifying the specific regulated entity affected by a circular is a common question type.
- Core Disclosure Requirement: NBFCs must now disclose detailed exposures to related parties in their financial statements. Why it matters for exam: The fundamental change introduced by the circular is a key concept to grasp.
- Specific Disclosure Categories: Students should be aware that disclosures cover both loans and contracts/arrangements with related parties. For loans, it includes details like outstanding amounts, proportion of total exposure, SMAs, NPAs, and provisions. Why it matters for exam: Knowing the specific items required for disclosure, especially SMAs and NPAs, can be tested.
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Amendment Directions, 2026 |
| Issued By | Reserve Bank of India (RBI) |
| Applicability | All Non-Banking Financial Companies (NBFCs) |
| Key Change | Mandates detailed disclosure of "Exposures to Related Parties" in NBFCs' financial statements (Notes to Accounts). This includes loans, outstanding amounts, proportion of total credit exposure, SMA/NPA classification, provisions, and details of contracts/arrangements. |
| Effective Date | April 1, 2026 (NBFCs may implement earlier). |
| Purpose | To enhance transparency in related party transactions for better credit risk management and overall financial stability, aligning with new credit risk management directions. |
Reserve Bank of India (All India Financial Institutions – Financial Statements: Presentation and Disclosures) – Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) regularly reviews and updates its regulatory framework for financial institutions to enhance transparency and improve risk management. This circular refers to the existing Reserve Bank of India (All India Financial Institutions – Financial Statements: Presentation and Disclosures) Directions, 2025. It stems from a review following the issuance of the Reserve Bank of India (All India Financial Institutions – Credit Risk Management) – Amendment Directions, 2026. The RBI, under its powers, particularly Section 45L of the RBI Act, 1934, deemed it necessary to introduce new disclosure requirements for All India Financial Institutions (AIFIs) to ensure public interest and better financial reporting.
Key Decision
This amendment introduces a crucial change in the financial reporting requirements for All India Financial Institutions (AIFIs). It mandates the disclosure of "Exposures to Related Parties" within their financial statements, specifically in Chapter-IV ‘Disclosure in Financial Statements – Notes to Accounts’, under a new sub-sub paragraph 19(9)(vi) on ‘Credit concentration risk’.
AIFIs are now required to disclose comprehensive details about:
- Loans to Related Parties: This includes aggregate values of sanctioned loans, outstanding loans (both total and as a proportion of total credit exposure), outstanding loans categorized as Special Mention Accounts (SMA) or Non-Performing Assets (NPA), and the provisions held against these loans.
- Contracts and Arrangements involving Related Parties: This includes the aggregate value of contracts awarded and outstanding contracts involving related parties.
The definition of "related parties" will be as per the Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025. These amendments become effective from April 1, 2026, though AIFIs have the option to implement them earlier.
Exam Relevance
- Circular Issuing Authority & Power: This circular is issued by the Reserve Bank of India under Section 45L of the Reserve Bank of India Act, 1934. Exam Insight: Questions can test the specific section of the RBI Act that grants such powers for issuing directions to financial institutions.
- Affected Institutions: The directions are applicable to All India Financial Institutions (AIFIs). Exam Insight: Understand which specific types of financial entities are covered by these guidelines, not all banks or financial institutions.
- Core Change - Disclosure Theme: The key theme is enhanced disclosure of "Exposures to Related Parties" under "Credit concentration risk". Exam Insight: Identify the main area of financial reporting that this amendment addresses.
- Specific Disclosure Items: AIFIs must disclose details like aggregate loans sanctioned, outstanding loans (including SMA and NPA categories), provisions held, and contracts with related parties. Exam Insight: Be aware of the types of specific data points mandated for disclosure, especially those related to asset quality (SMA, NPA).
- Effective Date: The amendments come into force from April 1, 2026. Exam Insight: Important dates for implementation are frequently tested.
- Related Parties Definition: The definition of "related parties" is drawn from the Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025. Exam Insight: Understanding that definitions are often cross-referenced to other regulatory documents is key.
Summary Table
| Particulars | Details |
|---|---|
| Circular Number | RBI/2025-26/188 DOR.CRE.REC.389/21.04.018/2025-26 |
| Date of Issue | January 05, 2026 |
| Applicable To | All India Financial Institutions (AIFIs) |
| Previous Directions | Reserve Bank of India (All India Financial Institutions – Financial Statements: Presentation and Disclosures) Directions, 2025 |
| Core Amendment | Insertion of new sub-sub paragraph 19(9)(vi) in Chapter-IV ‘Disclosure in Financial Statements – Notes to Accounts’ on ‘Credit concentration risk’. |
| Mandatory Disclosure | Details of Exposures to Related Parties. This includes: A. Loans to Related Parties (sanctioned, outstanding, proportion to total credit, SMA/NPA status, provisions). B. Contracts and Arrangements involving Related Parties (awarded, outstanding). |
| Definition of Related Parties | As per Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025. |
| Effective Date | April 1, 2026 (AIFIs may implement earlier). |
Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background
The Reserve Bank of India (RBI) periodically reviews and updates its prudential norms for commercial banks, especially concerning capital adequacy. These norms dictate how much capital banks must hold against their assets (like loans) to cover potential risks. This particular circular amends the existing "Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025". The primary focus of this amendment is on how banks assess and assign risk weights to claims on non-resident corporates, particularly those originating from International Financial Services Centres (IFSC).
Key Decision
This amendment introduces significant changes to how banks risk-weight claims on non-resident corporates. The key decisions are:
- Inclusion of a New Rating Agency: For claims on non-resident corporates originating at an International Financial Services Centre (IFSC), banks can now use ratings assigned by M/s CareEdge Global IFSC Limited. Previously, banks primarily relied on international rating agencies like S&P, Fitch, and Moody’s.
- New Risk Weight Mapping for CareEdge Global IFSC Limited: A specific risk weight mapping table (Table 10.2) has been introduced for ratings provided by M/s CareEdge Global IFSC Limited for IFSC-originated claims.
- AAA: 20% risk weight
- AA: 30% risk weight
- A: 50% risk weight
- BBB: 100% risk weight
- BB & below: 150% risk weight
- Clarification on Unrated Claims:
- Unrated claims where the aggregate exposure from the banking system is more than ₹200 crore will attract a risk weight of 150 per cent.
- Claims with an aggregate exposure from the banking system of more than ₹100 crore that were previously rated but later became unrated will also attract a risk weight of 150 per cent.
- No claim on an unrated corporate shall be given a risk weight preferential to that assigned to its sovereign of incorporation.
- Amendment to List of Recognized Agencies: The list of international credit rating agencies that banks may use for risk weighting claims for capital adequacy purposes (Para 132) has been updated to include CareEdge Global IFSC Limited specifically for non-resident corporate exposures originating at IFSC. These amendments come into force with immediate effect from January 09, 2026.
Exam Relevance
- Circular Date & Number: The circular RBI/2025-26/189 was issued on January 09, 2026. Why it matters for exam: Knowing the latest circular dates and numbers is crucial for understanding the timeline of regulations.
- Key Section Amended: The amendment primarily impacts Para 49 and Para 132 of the Prudential Norms on Capital Adequacy Directions. Why it matters for exam: Questions might reference specific paragraphs or their subject matter (e.g., risk weights for non-resident corporates).
- New Rating Agency: CareEdge Global IFSC Limited is now recognized for non-resident corporate exposures originating at International Financial Services Centre (IFSC). Why it matters for exam: The introduction of a new entity or specific geographic focus (IFSC) is a high-yield question area.
- Risk Weights for CareEdge Global IFSC Limited:
- AAA: 20%
- AA: 30%
- A: 50%
- BBB: 100%
- BB & below: 150%
- Why it matters for exam: Specific risk weight percentages for different ratings are frequently tested.
- Unrated Claims Thresholds:
- New unrated claims with aggregate exposure > ₹200 crore get 150% risk weight.
- Previously rated, now unrated claims with aggregate exposure > ₹100 crore get 150% risk weight.
- Why it matters for exam: Exact monetary thresholds and associated risk weights are critical factual points often asked.
- Effective Date: The amendment came into force with immediate effect from January 09, 2026. Why it matters for exam: Effective dates are important for questions about implementation.
Summary Table
| Aspect | Details |
|---|---|
| Circular Number & Date | RBI/2025-26/189, January 09, 2026 |
| Amended Directions | Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025 |
| Key Changes | 1. Recognition of M/s CareEdge Global IFSC Limited for risk weighting non-resident corporate claims originating at IFSC. 2. Specific risk weight mapping for CareEdge Global IFSC Limited ratings. 3. Clarification on risk weights for unrated claims: 150% for >₹200 Cr (new unrated) or >₹100 Cr (earlier rated, now unrated). |
| CareEdge Risk Weights | AAA: 20%, AA: 30%, A: 50%, BBB: 100%, BB & below: 150% |
| Unrated Claims Rule | 150% risk weight for: - New unrated claims > ₹200 crore - Previously rated, now unrated claims > ₹100 crore (Both refer to aggregate exposure from the banking system) |
| Sections Amended | Para 49 and Para 132 |
| Effective Date | Immediate effect from January 09, 2026 |
Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background This circular, dated January 09, 2026, amends the existing Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Directions, 2025. It primarily focuses on refining the risk weighting framework for claims on non-resident corporates, especially those originating from International Financial Services Centres (IFSC), to ensure robust capital adequacy norms for Small Finance Banks.
Key Decision The RBI has revised the guidelines for assigning risk weights to claims on non-resident corporates. A significant change is the recognition of M/s CareEdge Global IFSC Limited as an approved international credit rating agency specifically for exposures originating in IFSCs. This brings a new, dedicated risk weight mapping for such claims.
Revised Risk Weights (for claims originating in IFSC, rated by CareEdge Global IFSC Limited):
- AAA: 20%
- AA: 30%
- A: 50%
- BBB: 100%
- BB & below: 150%
Unrated Claims Specifics:
- Unrated claims with an aggregate exposure from the banking system exceeding ₹200 crore will attract a risk weight of 150%.
- Claims with an aggregate exposure from the banking system exceeding ₹100 crore that were previously rated and subsequently become unrated will also attract a risk weight of 150%.
- No claim on an unrated corporate shall be given a risk weight preferential to that assigned to its sovereign of incorporation.
Approved Rating Agencies: The list of approved international credit rating agencies for capital adequacy purposes now includes CareEdge Global IFSC Limited (specifically for non-resident corporate exposures originating in IFSC), alongside existing agencies like Fitch, Moody's, and Standard & Poor’s. These amendments come into force with immediate effect.
Exam Relevance
- Circular Date & Number: The circular is dated January 09, 2026, and its number is RBI/2025-26/190 DOR.STR.REC.391/21-01-002/2025-26. Why it matters: Specific dates and circular numbers can be direct questions to test attention to detail.
- New Rating Agency: CareEdge Global IFSC Limited has been added to the list of approved international credit rating agencies. Why it matters: Identifying newly approved entities and the specific conditions for their use (e.g., 'for IFSC exposures only') is a common question type.
- IFSC Specific Risk Weights: Understand that a separate risk weight mapping (Table 8.2) applies for claims originating in IFSCs when rated by CareEdge Global IFSC Limited. Why it matters: This distinction (IFSC vs. non-IFSC) and the associated risk percentages are high-yield information for capital adequacy calculations.
- Risk Weights for Unrated Claims: Claims on unrated corporates exceeding ₹200 crore (aggregate exposure) attract a 150% risk weight. Similarly, claims over ₹100 crore (aggregate exposure) that become unrated also get 150%. Why it matters: These specific monetary thresholds and corresponding risk weights for unrated or downgraded claims are frequently tested in objective questions.
- Legal Provision: The RBI issued these directions under Section 35A of the Banking Regulation Act, 1949. Why it matters: Knowledge of the specific sections of banking acts under which RBI issues significant regulations is frequently tested.
Summary Table
| Aspect | Details |
|---|---|
| Circular Date | January 09, 2026 |
| Amendment to | RBI (SFB - Prudential Norms on Capital Adequacy) Directions, 2025 |
| Key Change | Revised risk weighting for non-resident corporates, especially from IFSC. |
| New Approved Agency | CareEdge Global IFSC Limited (for IFSC exposures) |
| Risk Weight (CareEdge Global IFSC, IFSC claims) | AAA: 20%, AA: 30%, A: 50%, BBB: 100%, BB & below: 150% |
| Risk Weight (Unrated, >₹200 Cr exposure) | 150% |
| Risk Weight (Unrated, prev. rated >₹100 Cr exposure) | 150% |
| Legal Basis | Section 35A, Banking Regulation Act, 1949 |
| Effective From | Immediate effect |
Reserve Bank of India (All India Financial Institutions (AIFIs) - Prudential Norms on Capital Adequacy) Amendment Directions, 2026
Background
This circular, issued on January 09, 2026, by the Reserve Bank of India (RBI), amends the existing "Reserve Bank of India (All India Financial Institutions (AIFIs) - Prudential Norms on Capital Adequacy) Directions, 2025". The amendment is a result of a review by the RBI, deemed necessary and expedient in the public interest, utilizing powers conferred by Section 45L of the Reserve Bank of India Act, 1934. Its primary purpose is to update and clarify guidelines concerning how All India Financial Institutions (AIFIs) calculate risk weights for capital adequacy, particularly for claims on non-resident corporates.
Key Decision
The RBI has introduced significant modifications to the prudential norms for AIFIs, specifically impacting the risk weighting of claims on non-resident corporates:
- Recognition of New Rating Agency: For the first time, M/s CareEdge Global IFSC Limited has been recognized as an international credit rating agency whose ratings can be used by AIFIs for claims on non-resident corporates, specifically those originating at an International Financial Services Centre (IFSC).
- New Risk Weight Table: A new Table 9.2 has been introduced, detailing the specific risk weight mapping for ratings assigned by CareEdge Global IFSC Limited for IFSC-originating claims. For instance, an AAA rating attracts a 20% risk weight, while BB & below ratings attract 150%.
- Clarification on Unrated Claims: The circular clarifies the risk weights for certain unrated exposures:
- Unrated claims with an aggregate exposure from the banking system exceeding ₹200 crore will now attract a 150% risk weight.
- Claims with an aggregate exposure from the banking system exceeding ₹100 crore that were previously rated but have since become unrated will also attract a 150% risk weight.
- It reiterates that no claim on an unrated corporate shall be given a risk weight preferential to that assigned to its sovereign of incorporation.
- Updated List of Recognized Agencies: Paragraph 125 of the original Directions has been updated to officially include CareEdge Global IFSC Limited in the list of international credit rating agencies AIFIs may use for risk weighting purposes, alongside Fitch, Moody's, and Standard & Poor’s.
These amendments come into force with immediate effect from the date of the circular, January 09, 2026.
Exam Relevance
- Circular Identifier: The circular number RBI/2025-26/191DOR.STR.REC.392/21-01-002 and its date January 09, 2026 are crucial. Why it matters: Questions might test your ability to identify the correct circular for specific amendments.
- New Rating Agency: CareEdge Global IFSC Limited has been added to the list of recognized international credit rating agencies for AIFIs. Why it matters: The name of new entities or agencies recognized by RBI is a common exam question.
- Specific Applicability: The ratings by CareEdge Global IFSC Limited are specifically for non-resident corporate exposures originating at International Financial Services Centre (IFSC). Why it matters: Understanding the scope and conditions of new rules is key; watch out for precise wording like 'originating at IFSC'.
- Risk Weight Percentages (CareEdge): Remember the risk weights for different ratings by CareEdge Global IFSC Limited (e.g., AAA - 20%, AA - 30%, A - 50%, BBB - 100%, BB & below - 150%). Why it matters: Specific percentages, particularly for the highest and lowest rating categories, are frequently tested.
- Unrated Claims Threshold 1: Claims on unrated corporates with aggregate exposure from the banking system exceeding ₹200 crore attract a 150% risk weight. Why it matters: Financial thresholds and their corresponding penalties or requirements are high-yield questions.
- Unrated Claims Threshold 2: Claims with aggregate exposure from the banking system exceeding ₹100 crore that were previously rated but subsequently became unrated also attract a 150% risk weight. Why it matters: This distinguishes between different scenarios of unrated exposures and is an important detail.
- Legal Mandate: The RBI issued these directions under Section 45L of the Reserve Bank of India Act, 1934. Why it matters: Knowledge of the legal provisions empowering RBI's regulatory actions is fundamental.
Summary Table
| Parameter | Before (Implicit/General) | After (Effective Jan 09, 2026) |
|---|---|---|
| Recognized Rating Agencies for IFSC Claims | S&P, Fitch, Moody's (primarily) | S&P, Fitch, Moody's, CareEdge Global IFSC Limited (specifically for IFSC-originating non-resident corporate exposures) |
| Risk Weight for CareEdge Global IFSC Ltd. (AAA) | N/A (not previously recognized) | 20% |
| Risk Weight for CareEdge Global IFSC Ltd. (BB & below) | N/A (not previously recognized) | 150% |
| Risk Weight for Unrated Claims (> ₹200 Cr) | General unrated corporate rules; potentially varied | 150% (for aggregate exposure from banking system > ₹200 crore) |
| Risk Weight for Unrated (ex-rated) Claims (> ₹100 Cr) | General unrated corporate rules; potentially varied | 150% (for aggregate exposure from banking system > ₹100 crore that were previously rated) |
| Legal Basis for Amendment | Original Directions under various RBI powers | Section 45L of the Reserve Bank of India Act, 1934 (specifically for this amendment), along with other enabling laws. |
| Effective Date | Original Directions effective from their date | Immediate effect from January 09, 2026 |
Foreign Exchange Management (Guarantees) Regulations, 2026
Background
The Reserve Bank of India (RBI) periodically updates its regulations governing foreign exchange transactions to ensure clarity, consolidation, and ease of compliance. Guarantees involving parties resident outside India are a crucial part of international trade and finance, necessitating clear guidelines for Authorised Dealer (AD) Category I Banks. Previously, these guidelines were spread across numerous circulars and various Master Directions.
Key Decision
The RBI has issued new Foreign Exchange Management (Guarantees) Regulations, 2026, effective from January 12, 2026. This comprehensive regulation aims to consolidate and update the framework for foreign exchange guarantees.
Main points of the new regulations:
- Consolidation: The new regulations supersede 19 previous A.P. (DIR Series) Circulars related to foreign exchange guarantees, bringing all provisions under a single framework.
- Applicability: Authorised Dealer Category I Banks must follow these regulations when dealing with guarantees where any party is a person resident outside India.
- Reporting: A new system for comprehensive reporting of all guarantees (issued, modified, or invoked) has been introduced. This reporting will be done by customers to AD Banks using Form GRN. The format for AD banks to submit these returns will be communicated later.
- Discontinuation of specific reporting: Quarterly reporting on the issuance of guarantees for Trade Credit is being discontinued from the quarter ending March 2026.
- Amendments: Relevant provisions in several existing Master Directions (e.g., External Commercial Borrowings, Export/Import of Goods and Services, Other Remittance Facilities, and Reporting under FEMA, 1999) are being amended to align with the new regulations.
Exam Relevance
- New Regulations Name: The Foreign Exchange Management (Guarantees) Regulations, 2026. Why it matters for exam: Direct questions on the name and year of newly introduced key regulations are common.
- Effective Date: This circular is dated January 12, 2026. Why it matters for exam: While the regulations are "2026", the circular's issuance date can be asked.
- Key Form: Guarantees will now be reported in Form GRN. Why it matters for exam: Specific forms for compliance or reporting are frequently tested.
- Reporting Discontinuation: Quarterly reporting for issuance of guarantee for Trade Credit is discontinued from quarter ending March 2026. Why it matters for exam: Changes or discontinuations in reporting requirements are important for assessing understanding of regulatory shifts.
- Superseded Circulars: This new regulation supersedes 19 A.P. (DIR Series) Circulars. Why it matters for exam: The consolidation aspect, especially the number of previous circulars replaced, indicates a significant regulatory overhaul.
- Legal Framework: The directions are issued under Sections 10(4), 11(1), and 11(2) of the Foreign Exchange Management Act, 1999 (FEMA). Why it matters for exam: Questions often probe the specific sections of acts under which major regulations are issued.
Summary Table
| Feature | Before (Pre-Jan 2026) | After (Post-Jan 2026) |
|---|---|---|
| Governing Framework | Multiple A.P. (DIR Series) Circulars & Master Directions | Foreign Exchange Management (Guarantees) Regulations, 2026 |
| Reporting for Guarantees | Varied, less consolidated | Comprehensive reporting to AD banks in Form GRN |
| Quarterly Reporting (Trade Credit) | Required | Discontinued from Q.E. March 2026 |
| Superseded Docs | 19 A.P. (DIR Series) Circulars | N/A (Superseded) |
| Legal Basis | Sections 10(4), 11(1), 11(2) of FEMA, 1999 | Sections 10(4), 11(1), 11(2) of FEMA, 1999 |
Foreign Exchange Management (Guarantees) Regulations, 2026
Background
The Reserve Bank of India (RBI) has introduced new regulations concerning guarantees involving persons resident in India and persons resident outside India. These regulations are issued under the Foreign Exchange Management Act (FEMA), 1999. This circular supersedes the earlier Notification No. FEMA 8/2000-RB dated May 3, 2000, signifying a comprehensive update to the framework governing such guarantees. The aim is to streamline and clarify the rules for foreign exchange transactions involving guarantees, including counter-guarantees.
Key Decision
The RBI has issued the Foreign Exchange Management (Guarantees) Regulations, 2026, which lay down the conditions under which a person resident in India may be a party (as a principal debtor, surety, or creditor) to a guarantee where any other party is a person resident outside India. The regulations define various terms, specify prohibitions, list exemptions, and detail the conditions for obtaining or giving guarantees. A significant addition is the introduction of a Late Submission Fee (LSF) for delayed reporting of such guarantees. The regulations come into force from the date of their publication in the Official Gazette.
Exam Relevance
- Supersession: The Foreign Exchange Management (Guarantees) Regulations, 2026 supersedes Notification No. FEMA 8/2000-RB dated May 3, 2000. Why it matters for exam: Questions often focus on new regulations replacing old ones, asking for the date or number of the superseded circular.
- Key Definitions: Understand the definitions of "Authorised dealer," "Creditor," "Guarantee," "Principal debtor," and "Surety" in the context of FEMA. Also, the meaning of "International Financial Services Centre" (IFSC). Why it matters for exam: Basic definitions are fundamental and can be direct questions or crucial for understanding case-based questions.
- Prohibition & Exemptions: Know the general prohibition against Indian residents being parties to guarantees involving non-residents, and the specific exemptions, especially for guarantees by AD branches in IFSCs, IPCs for FPIs, and those under FEMA (Overseas Investment) Regulations, 2022. Why it matters for exam: These outline the permissible scope of activities; exceptions are often tested.
- Conditions for Guarantees: Conditions for a person resident in India to act as a surety or principal debtor (e.g., underlying transaction not prohibited, eligibility to lend/borrow). Pay attention to the exceptions where the lending/borrowing eligibility condition does not apply (e.g., AD bank guarantees with 100% collateral or counter-guarantee). Why it matters for exam: Detailed conditions and their exceptions are common areas for scenario-based questions.
- Reporting Requirements: The responsibility for reporting (surety, principal debtor, or creditor), what needs to be reported (issuance, changes, invocation), and the reporting frequency and deadlines. Reporting to AD bank quarterly within 15 calendar days and AD bank to RBI within 30 calendar days from the end of the quarter. Why it matters for exam: Reporting obligations, specific timelines (15 days, 30 days), and the entities responsible are frequently tested.
- Late Submission Fee (LSF): The formula for LSF: ₹7500 + 0.025% x A x n. Understand the components 'A' (amount involved) and 'n' (years of delay). Why it matters for exam: Numerical penalties and their calculation formulas are high-yield questions.
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Foreign Exchange Management (Guarantees) Regulations, 2026 |
| Circular Number & Date | No. FEMA 8(R)/2026-RB, January 6, 2026 |
| Supersedes | Notification No. FEMA 8/2000-RB dated May 3, 2000 |
| Applicability | Guarantees where one party is resident in India and another is resident outside India. |
| Key Definitions | Authorised dealer, Creditor, Guarantee, IFSC, Principal debtor, Surety. |
| Prohibition | No Indian resident can be party to such guarantee unless specifically permitted or exempted by FEMA/RBI. |
| Exemptions | Guarantees by AD branches abroad/IFSC (unless other party is Indian resident); IPCs for FPIs by AD custodian; Guarantees under FEMA (Overseas Investment) Regulations, 2022. |
| Reporting Obligation | Surety (if resident in India); Principal Debtor (if surety is non-resident & PD arranged); Creditor (if both surety/PD non-resident or creditor arranged). |
| Reporting Frequency | Quarterly, within 15 calendar days from quarter end (to AD bank). AD bank to RBI within 30 calendar days. |
| Late Submission Fee | ₹7500 + 0.025% x A x n (rounded upwards to nearest hundred), where A = amount, n = years of delay. |
Modified Interest Subvention Scheme for Short Term Loans for Agriculture and Allied Activities availed through Kisan Credit Card (KCC) during the financial year 2025-26\n\n### Background\nThis circular from the Reserve Bank of India (RBI) reiterates the continuation of the Modified Interest Subvention Scheme (MISS) for short term loans for agriculture and allied activities. It specifically extends the scheme for the financial year 2025-26, following its applicability for the previous financial year 2024-25.\n\n### Key Decision\nThe Government of India has approved the continuation of the Modified Interest Subvention Scheme (MISS) for the financial year 2025-26. This scheme aims to provide short term crop loans and loans for allied activities (like animal husbandry, dairy, fisheries, bee keeping) up to an overall limit of ₹3 lakh to farmers through Kisan Credit Card (KCC) at concessional interest rates. The key stipulations for 2025-26 are:\n\n* Lending Rate to Farmers: The rate will be 7% per annum.\n* Interest Subvention to Lending Institutions: Public Sector Banks, Private Sector Banks (rural/semi-urban branches), Small Finance Banks, and computerized PACS ceded with SCBs will receive an interest subvention of 1.50% per annum.\n* Prompt Repayment Incentive: Farmers who repay their loans on time (within one year of disbursement) will receive an additional interest subvention of 3% per annum. This means prompt repayers will effectively get loans at 4% per annum.\n* Loan Limits: The benefits are available on an overall limit of ₹3 lakh per annum. For farmers involved only in allied activities, there is a maximum sub-limit of ₹2 lakh per farmer.\n* Warehouse Storage Benefit: Small and marginal farmers storing their produce in Warehousing Development Regulatory Authority (WDRA) accredited warehouses can avail the interest subvention benefit for an additional period of up to six months post-harvest, against negotiable warehouse receipts.\n* Natural Calamities Relief: \n * For general natural calamities, banks will receive the applicable interest subvention for the first year on the restructured loan amount.\n * For severe natural calamities, the interest subvention will be available for the first three years/entire period (up to a maximum of five years) on the restructured loan. The prompt repayment incentive will also apply. Such cases are decided by a High Level Committee (HLC) based on recommendations from the Inter-Ministerial Central Team (IMCT) and Sub Committee of National Executive Committee (SC-NEC).\n* Mandatory Aadhaar Authentication: Aadhaar seeding and e-KYC are mandatory for all beneficiaries to avail scheme benefits.\n* Validation of Multiple Accounts: A farmer can avail MISS benefits through multiple KCCs, but the overall limit remains ₹3 lakh per farmer across all accounts. For a specific land parcel, only one KCC account (the one with the highest sanctioned amount) will receive the benefit.\n* Reporting and Compliance: Banks are required to encourage digital transactions, accurately capture and report granular data on individual farmer beneficiaries (including social category and crop sown) on the KRP (KCC Reporting Portal), and submit timely and certified MISS claims on KRP.\n\n### Exam Relevance\n* Scheme Continuation: The Modified Interest Subvention Scheme (MISS) has been extended for the financial year 2025-26. Exam Insight: Questions often test the latest financial year for which a key government scheme is applicable.\n* Interest Rates: Lending rate to farmers is 7%. Interest subvention to banks is 1.50%. Effective rate for prompt repayers is 4% (due to an additional 3% subvention). Exam Insight: Exact percentages for lending rates, subvention, and effective rates are frequently asked.\n* Loan Limits: Overall KCC limit is ₹3 lakh. Sub-limit for only allied activities is ₹2 lakh. Exam Insight: Specific financial thresholds and their conditions (e.g., overall vs. sub-limit for specific activities) are important.\n* Special Provisions: Interest subvention for warehouse storage is available for up to six months post-harvest. Exam Insight: Duration of special benefits and their conditions (e.g., WDRA accredited warehouses) are potential questions.\n* Natural Calamity Relief: Differentiate between general natural calamities (first year IS) and severe natural calamities (first three years/max five years IS + prompt repayment incentive). Also, the High Level Committee (HLC), Inter-Ministerial Central Team (IMCT), and Sub Committee of National Executive Committee (SC-NEC) are involved in severe calamity decisions. Exam Insight: Distinction in relief duration and the names of responsible committees for severe calamities are high-yield information.\n* Mandatory Requirement: Aadhaar authentication is mandatory for all beneficiaries. Exam Insight: Any mandatory compliance requirement linked to a scheme is a key detail.\n* Multiple Accounts: A farmer can have multiple KCCs but the overall benefit limit is ₹3 lakh, and only one KCC per land parcel (the one with the highest sanctioned amount) receives the benefit. Exam Insight: Rules related to beneficiary eligibility and limits across multiple accounts are important for understanding scheme mechanics.\n\n### Summary of Key Provisions\n* Financial Year: 2025-26\n* Lending Rate to Farmers: 7%\n* Interest Subvention to Banks: 1.50%\n* Additional IS for Prompt Repayment: 3%\n* Effective Rate for Prompt Repayers: 4%\n* Overall KCC Limit: ₹3 lakh\n* Sub-limit for Allied Activities (only): ₹2 lakh\n* Warehouse Benefit Duration: Up to 6 months post-harvest\n* Aadhaar/e-KYC: Mandatory\n* Severe Natural Calamities Decision Authority: HLC, IMCT, SC-NEC
Reserve Bank of India (Commercial Banks - Internal Ombudsman) Directions, 2026
Background
The Reserve Bank of India (RBI) continually strives to enhance customer service and grievance redressal mechanisms within the banking system. Prior to these directions, while banks had internal complaint resolution processes, there wasn't a mandated, independent apex-level internal authority to review customer complaints before their final rejection by the bank. This often led to a higher number of complaints escalating directly to the RBI's external Ombudsman scheme, increasing its workload and potentially delaying resolution for customers.
Key Decision
These Directions mandate specific Commercial Banks to establish an 'Internal Ombudsman' (IO) mechanism. The IO will act as an independent authority within the bank, reviewing customer complaints that have been partially or wholly rejected by the bank's internal grievance redressal system. The primary goal is to strengthen the internal complaint resolution process, ensuring a fair, speedy, and meaningful resolution of customer issues before they reach the external RBI Integrated Ombudsman Scheme. This framework aims to provide an additional layer of review and accountability within the bank itself.
Exam Relevance
- Issuing Authority & Power: The RBI issued these Directions under Section 35A of the Banking Regulation Act, 1949. Why it matters for exam: Questions often test the specific sections of acts empowering RBI to issue regulations.
- Applicability Criteria: These Directions apply to Commercial Banks (excluding Small Finance Banks, Payments Banks, and Local Area Banks) having 10 or more banking outlets in India as on March 31, 2025. Banks meeting this criterion later will have six months to comply. Why it matters for exam: The specific threshold (10 outlets) and the cut-off date (March 31, 2025) are common factual questions.
- Commencement & Compliance Dates: The Directions came into force with immediate effect from January 14, 2026, but certain clauses (like 7(2), 14(2), 14(4)) relating to determining the number of IOs/Dy. IOs must be complied with by June 30, 2026. Why it matters for exam: Differentiating between immediate effect and phased compliance dates is crucial.
- Internal Ombudsman (IO) Qualifications: An IO must be a retired or serving officer of equivalent rank to a General Manager in an RE or Financial Sector Regulatory Body, with a minimum of seven years experience in relevant fields. They must not have been previously employed by the appointing bank/group. The age limit is 70 years. Why it matters for exam: Specific rank, experience, age, and independence criteria are frequently tested.
- Deputy Internal Ombudsman (Dy. IO) Qualifications: A Dy. IO must be a retired or serving officer of equivalent rank to a Deputy General Manager, with a minimum of five years experience. They also have a 70-year age limit and must not have been previously employed by the appointing bank/group. Why it matters for exam: Comparison of IO vs. Dy. IO qualifications (rank, experience) is a potential question area.
- Number of IOs/Dy. IOs: Every bank must appoint at least one IO. The Customer Service Committee of the Board will annually determine the actual number of IOs/Dy. IOs. Why it matters for exam: The minimum number and the responsible committee are key administrative details.
- Core Objective: The primary objective is to strengthen the Internal Grievance Redress mechanism and ensure a speedy and meaningful resolution of customer complaints by enabling a review before their rejection. Why it matters for exam: Understanding the "why" behind the regulation helps in conceptual questions.
Summary Table
| Aspect | Details |
|---|---|
| Circular Title | Reserve Bank of India (Commercial Banks - Internal Ombudsman) Directions, 2026 |
| Issuing Authority | RBI under Section 35A of Banking Regulation Act, 1949 |
| Effective Date | Immediate (January 14, 2026), with some clauses by June 30, 2026 |
| Applicability | Commercial Banks (excluding SFBs, PBs, LABs) with 10+ banking outlets as on March 31, 2025 (or 6 months after meeting criteria) |
| Main Objective | Strengthen internal grievance redressal, ensure review of rejected complaints by an apex authority within the bank before escalation. |
| IO Qualifications | Equivalent to General Manager, min. 7 years experience, not ex-employee of bank/group, max age 70 years. |
| Dy. IO Qualifications | Equivalent to Deputy General Manager, min. 5 years experience, not ex-employee of bank/group, max age 70 years. |
| Minimum IOs | At least one per applicable bank. |
| Determining Number | Customer Service Committee of the Board (annually). |
Reserve Bank of India (Small Finance Banks - Internal Ombudsman) Directions, 2026
Background
The Reserve Bank of India (RBI), exercising its powers under Section 35A of the Banking Regulation Act, 1949, has issued these new directions. The primary objective is to significantly enhance the internal grievance redressal mechanism within Small Finance Banks (SFBs). By mandating the appointment of an Internal Ombudsman (IO), the RBI aims to ensure that customer complaints receive a thorough review by an apex-level authority within the bank before being rejected, thereby facilitating a speedy and meaningful resolution for customers.
Key Decision
These Directions make it mandatory for eligible Small Finance Banks to establish an Internal Ombudsman (IO) framework. This involves appointing an Internal Ombudsman and potentially Deputy Internal Ombudsmen to review customer complaints that have been partially or wholly rejected by the bank's internal grievance redressal system. The framework specifies criteria for the appointment, tenure, and responsibilities of the IO and Dy. IO, aiming to provide an independent and fair review of customer grievances.
Exam Relevance
- Issuing Authority: The directions are issued by the RBI under Section 35A of the Banking Regulation Act, 1949. Why it matters for exam: Questions often focus on the specific legal provisions empowering the RBI to issue such regulations.
- Applicability Criteria: Mandatory for Small Finance Banks having 10 or more banking outlets in India as on March 31, 2025. Why it matters for exam: Precise eligibility criteria and cut-off dates are frequently tested, especially the number of outlets and the reference date.
- Minimum IO Requirement: Every applicable bank must appoint at least one Internal Ombudsman. Why it matters for exam: Basic numerical requirements like the minimum number of officers are common factual questions.
- IO Qualification (Rank & Experience): The IO must be a retired/serving officer equivalent to a General Manager in a Regulated Entity (RE) or Financial Sector Regulatory Body, with a minimum of seven years experience in relevant fields (banking, regulation, consumer protection etc.). Why it matters for exam: Specific rank and experience requirements for key roles are high-yield questions.
- Dy. IO Qualification (Rank & Experience): The Deputy IO must be equivalent to a Deputy General Manager, with a minimum of five years experience. Why it matters for exam: Distinguishing between IO and Dy. IO qualifications, particularly experience years, is a common exam pattern.
- Age Limit: Both IO and Dy. IO shall not be over 70 years of age before the completion of their tenure. Why it matters for exam: Age limits for statutory or regulatory positions are important details.
- Multiple Engagements for IO vs. Dy. IO: An IO can work in more than one RE simultaneously with approval. A Dy. IO cannot be employed in more than one RE simultaneously. Why it matters for exam: This specific difference in the terms of engagement between IO and Dy. IO is a key detail a question setter might highlight.
- Compliance Deadline: Specific clauses related to determining the number of IO/Dy. IOs (clause 7(2)) and others must be complied with by June 30, 2026. Why it matters for exam: Important compliance deadlines are often asked.
- Responsible Committee: The Customer Service Committee of the Board of the bank determines the number of IO/Dy. IOs at least once a year. Why it matters for exam: Knowing which internal committee is responsible for oversight is a key governance point.
Summary Table
| Feature | Details |
|---|---|
| Circular Title | Reserve Bank of India (Small Finance Banks - Internal Ombudsman) Directions, 2026 |
| Issued By | RBI, under Section 35A of Banking Regulation Act, 1949 |
| Objective | Strengthen internal grievance redress, ensure speedy complaint resolution for SFB customers |
| Applicability | Small Finance Banks (SFBs) with 10 or more banking outlets as of March 31, 2025 |
| IO Rank | Equivalent to General Manager (in RE or Regulatory Body) |
| IO Experience | Minimum 7 years in relevant areas (banking, regulation, consumer protection) |
| IO Age Limit | Not over 70 years |
| IO Multiple REs | Can work for multiple REs simultaneously (with approval) |
| Dy. IO Rank | Equivalent to Deputy General Manager (in RE or Regulatory Body) |
| Dy. IO Experience | Minimum 5 years in relevant areas |
| Dy. IO Age Limit | Not over 70 years |
| Dy. IO Multiple REs | Cannot work for multiple REs simultaneously |
| Minimum IOs | At least one IO per applicable SFB |
| Compliance Date | Clauses like 7(2) by June 30, 2026. Other clauses effective immediately. |
| Oversight Committee | Customer Service Committee of the Board (determines number of IO/Dy. IOs annually) |
Reserve Bank of India (Payments Banks - Internal Ombudsman) Directions, 2026\n\n### Background\nThe Reserve Bank of India (RBI) has introduced these directions to strengthen the internal grievance redress mechanism within Payments Banks. The primary goal is to ensure a speedy and meaningful resolution of customer complaints by establishing an apex-level authority, the Internal Ombudsman (IO), within the bank to review complaint resolutions before rejection. This initiative is aimed at enhancing customer protection and trust in the banking system.\n\n### Key Decision\nThe RBI mandates that eligible Payments Banks must appoint an Internal Ombudsman (IO) and may appoint a Deputy Internal Ombudsman (Dy. IO). These directions outline the eligibility criteria, roles, responsibilities, tenure, and appointment process for the IO and Dy. IO. This ensures that customer complaints receive a thorough review by an independent authority within the bank before a final decision is made, thereby promoting fairness and transparency.\n\n### Exam Relevance\n* Applicability Criteria: These directions apply to Payments Banks having 10 or more banking outlets in India as on March 31, 2025. Payments Banks meeting this criteria after this date must comply within six months. Why it matters for exam: Questions often ask for the specific eligibility thresholds and dates for new regulations.\n* Effective Dates: The directions come into force with immediate effect, but compliance for certain clauses (7(2), 14(2), 14(4)) is required by June 30, 2026. Why it matters for exam: Key dates, especially phased implementation deadlines, are frequently tested.\n* Internal Ombudsman (IO) Qualifications: An IO must be a retired or serving officer of a rank equivalent to a General Manager in a Regulated Entity or Financial Sector Regulatory Body, with a minimum of 7 years of relevant experience. They must not have been previously or presently employed by the appointing bank or its related entities. The age limit is not over 70 years. Why it matters for exam: Specific experience, rank, age limits, and independence criteria are high-yield information.\n* Deputy Internal Ombudsman (Dy. IO) Qualifications: A Dy. IO must be a retired or serving officer of a rank equivalent to a Deputy General Manager, with a minimum of 5 years of relevant experience. Similar employment and age restrictions apply. Why it matters for exam: Distinctions between IO and Dy. IO qualifications (e.g., experience years, rank) are potential comparison questions.\n* Number of IO/Dy. IO: Every bank shall appoint at least one IO. The Customer Service Committee of the Board determines the number of IO/Dy. IOs annually, considering complaint volume and complexity. Why it matters for exam: The minimum requirement and the specific committee responsible for such decisions are important facts.\n* IO/Dy. IO in Multiple REs: An IO may work in more than one RE simultaneously with Board approval, but a Dy. IO cannot. Why it matters for exam: This specific operational difference can be a trick question.\n\n### Summary Table\n\n| Feature | Details |\n| :---------------------- | :-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |\n| Circular Title | Reserve Bank of India (Payments Banks - Internal Ombudsman) Directions, 2026 |\n| Circular Number | RBI/CEPD/2025-26/383 CEPD.PRD.No.S1028/13.01.019/2025-26 |\n| Date of Issue | January 14, 2026 |\n| Applicability | Payments Banks with 10 or more banking outlets as on March 31, 2025. Also applicable within six months of meeting the criteria after this date. |\n| Commencement | Immediate effect, except compliance for clauses 7(2), 14(2), and 14(4) by June 30, 2026. |\n| IO Qualification | Retired/serving officer (GM rank equivalent), min 7 years experience, not employed by the bank, not over 70 years of age. |\n| Dy. IO Qualification| Retired/serving officer (DGM rank equivalent), min 5 years experience, not employed by the bank, not over 70 years of age. |\n| Minimum IO | At least one IO per bank. |\n| Decision Authority | Customer Service Committee of the Board determines the number of IO/Dy. IOs annually. |\n| Multiple REs | IO can work in multiple REs (with Board/CSC approval); Dy. IO cannot. |
Reserve Bank of India (Non-Banking Financial Companies - Internal Ombudsman) Directions, 2026
Background
The Reserve Bank of India (RBI) continually strives to strengthen the financial system and enhance consumer protection. While an external Ombudsman Scheme already exists, there was a need to bolster the internal grievance redressal mechanisms within Non-Banking Financial Companies (NBFCs). This circular addresses that need by mandating the appointment of an Internal Ombudsman (IO) in certain large NBFCs. The primary objective is to ensure that customer complaints are reviewed by an apex-level internal authority within the NBFC before their rejection, leading to a speedier and more meaningful resolution for customers.
Key Decision
The RBI has issued the Reserve Bank of India (Non-Banking Financial Companies - Internal Ombudsman) Directions, 2026, which mandate specific categories of NBFCs to appoint an Internal Ombudsman (IO).
These directions are applicable to:
- Deposit-taking NBFCs (NBFCs-D) with 10 or more branches.
- Non-Deposit taking NBFCs (NBFCs-ND) with an asset size of ₹5,000 crore and above and having a public customer interface.
The criteria for applicability are to be met as on March 31, 2025. NBFCs meeting these criteria after March 31, 2025, must comply within six months of meeting the eligibility.
Exclusions: The directions explicitly do not apply to Housing Finance Companies (HFCs), Core Investment Companies (CICs), Infrastructure Debt Fund-Non-Banking Financial Companies (IDF-NBFCs), Non-Banking Financial Company - Infrastructure Finance Companies (NBFC-IFCs), Non-Operative Financial Holding Companies (NOFHCs), Primary dealers, and Mortgage Guarantee Companies (MGCs). NBFCs under Corporate Insolvency Resolution Process, in liquidation/winding up, or under specific RBI directions are also excluded.
The IO's role is to review customer complaints that have already been examined by the NBFC's internal grievance redressal mechanism but have either been rejected or not resolved to the customer's satisfaction. This acts as an internal appellate authority.
Exam Relevance
- Applicability Thresholds: The circular specifies which NBFCs are covered based on their nature (deposit-taking vs. non-deposit-taking) and size. Why it matters for exam: Questions often ask for the exact thresholds for applicability, such as the number of branches for NBFCs-D (10 or more) or the asset size for NBFCs-ND (₹5,000 crore and above). The cut-off date for this assessment (March 31, 2025) is also crucial.
- Exclusions: Several types of NBFCs are explicitly excluded from this framework. Why it matters for exam: Expect questions listing different NBFC types and asking which ones are not required to appoint an IO. Memorizing the excluded categories (HFC, CIC, IDF-NBFC, NBFC-IFC, NOFHC, Primary dealers, MGC) is important.
- Effective Date & Compliance Deadlines: While the directions are effective immediately from January 14, 2026, certain clauses (7(2), 14(2), and 14(4)) have a later compliance deadline of June 30, 2026. Why it matters for exam: Distinguishing between the general effective date and specific compliance deadlines for certain operational aspects can be a point of questioning.
- Internal Ombudsman (IO) Qualifications: The circular details the eligibility criteria for an IO, including rank equivalent (General Manager), experience (minimum seven years), and maximum age (70 years). Similar, but slightly different, criteria apply for a Deputy IO (Dy. IO). Why it matters for exam: Questions on the specific qualifications, such as required rank, years of experience, or age limits, are common in regulatory updates.
- Purpose of Internal Ombudsman: Understanding the core reason behind introducing the IO framework – to strengthen internal grievance redressal and ensure review before rejection – is fundamental. Why it matters for exam: Conceptual questions about the objective or spirit of the circular can be asked.
Summary Table
| Feature | Details |
|---|---|
| Circular Title | Reserve Bank of India (Non-Banking Financial Companies - Internal Ombudsman) Directions, 2026 |
| Circular Number | RBI/CEPD/2025-26/384 CEPD.PRD.No.S1030/13.01.019/2025-26 |
| Date of Issue | January 14, 2026 |
| Effective From | Immediate effect (from January 14, 2026), except clauses 7(2), 14(2), 14(4) which are by June 30, 2026 |
| Applicable To | NBFCs-D with 10 or more branches; NBFCs-ND with asset size ₹5,000 crore and above (as on March 31, 2025). Includes NBFCs meeting criteria post-March 31, 2025 (within 6 months). |
| Not Applicable To | HFC, CIC, IDF-NBFC, NBFC-IFC, NOFHC, Primary dealers, MGC; NBFCs under CIRP, liquidation, winding up, or specific RBI directions. |
| IO Qualification | Retired/serving officer (rank eq. to GM in RE/FSB), minimum 7 years experience in relevant areas; not previously/presently employed by the NBFC; under 70 years of age. |
| Dy. IO Qualification | Retired/serving officer (rank eq. to DGM in RE/FSB), minimum 5 years experience in relevant areas; not previously/presently employed by the NBFC; under 70 years of age. Can work in only one RE. |
| Purpose | Strengthen internal grievance redressal mechanism in NBFCs, ensuring speedy and meaningful resolution of customer complaints by enabling review before rejection by an apex internal authority. |
Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026
Background
The Reserve Bank of India (RBI) has introduced a new comprehensive set of regulations, the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026. These new regulations supersede the earlier Foreign Exchange Management (Export of Goods & Services) Regulations, 2015, marking a significant update in how India manages foreign exchange transactions related to trade. The primary goal is to streamline and modernize the existing framework, bringing both export and import of goods and services under a unified and updated regulatory umbrella.
Key Decision
The RBI, under the powers conferred by the Foreign Exchange Management Act, 1999, has enacted these new regulations. They outline the procedures for declaration of exports (both goods and services), the manner of receipt and payment for trade transactions, timeframes for realization of export proceeds, and provisions for reduction in export realization and set-off of receivables against payables. A key aspect is the introduction of simplified procedures for smaller value transactions, allowing for closure of entries in the Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS) based on exporter/importer declarations.
Exam Relevance
- Circular Number & Date: These are the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, notified vide Notification No. FEMA 23(R)/2026-RB dated January 13, 2026. Why it matters for exam: Questions often identify regulations by their specific number and date.
- Effective Date: These regulations shall come into force from October 01, 2026. Why it matters for exam: The implementation date of new rules is a crucial detail for regulatory updates.
- Superseded Regulations: These new regulations supersede the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 (Notification No. FEMA 23(R)/2015-RB dated January 12, 2016). Why it matters for exam: Understanding which previous regulations are replaced is important for historical context and current applicability.
- EDPMS/IDPMS Closure Threshold: For shipping bills/invoices up to ₹10 lakh (or its equivalent in foreign currency), entries in EDPMS/IDPMS may be closed based on a declaration from the exporter/importer. Why it matters for exam: Exact financial thresholds for simplified compliance procedures are high-yield questions.
- Export Realization Period: The general period for realizing and repatriating export value is fifteen months. However, if export of goods and services is invoiced or/and settled in Indian Rupees, this period is extended to eighteen months. Why it matters for exam: Specific timeframes for repatriation are frequently tested, especially exceptions like the one for INR settlements.
- Reduction in Export Value (Declaration): For export values up to ₹10 lakh (or its equivalent in foreign currency) per shipping bill/invoice, reduction of export value (including non-realisation) may be permitted based on an exporter's declaration. Why it matters for exam: This specific limit for simplified reduction processes is a likely point of inquiry.
Summary Table
| Feature | Old Regulations (2015) | New Regulations (2026) |
|---|---|---|
| Scope | Primarily Export of Goods & Services | Export and Import of Goods and Services (unified framework) |
| Effective From | Superseded | October 01, 2026 |
| EDF for Services (Timeline) | Specifics might vary, generally tied to export | Within 30 days from invoice (general); or on/before payment (for services other than software). |
| EDPMS/IDPMS Closure (Declaration) | No specific provision for declaration-based closure for small amounts (required AD verification for all) | For transactions up to ₹10 lakh, closure can be based on exporter/importer declaration. |
| Export Realization Period (General) | Typically 9 months (prior rules) or other specified periods | Fifteen months from date of shipment/invoice. |
| Export Realization Period (INR Settled) | No specific longer period for INR settlements | Eighteen months from date of shipment/invoice if invoiced/settled in Indian Rupees. |
| Reduction in Export Value (Declaration) | Required AD satisfaction for all cases | For export value up to ₹10 lakh, reduction (including non-realisation) can be permitted based on exporter's declaration. |
Forced ID 13278: Export and Import of Goods and Services
Background
The Reserve Bank of India (RBI) has noted that the existing regulations and directions governing the export and import of goods and services, under the Foreign Exchange Management Act (FEMA), 1999, were spread across various Master Directions and numerous individual circulars. This fragmented approach often led to complexities for stakeholders, including authorised dealers (ADs) and businesses engaged in foreign trade. A comprehensive review was undertaken in consultation with various stakeholders to simplify and consolidate these regulations.
Key Decision
The RBI, following a comprehensive review, has issued new consolidated regulations titled "Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026." These new regulations are designed to:
- Promote ease of doing business, particularly benefiting small exporters and importers.
- Empower authorised dealers (ADs) to provide faster and more efficient services to their customers.
These new regulations and the accompanying directions will become effective from October 01, 2026.
Key operational changes for Authorised Dealers include:
- Adherence to Regulations: ADs must ensure strict adherence to FEMA, 1999, its rules, regulations, directions, and the extant Foreign Trade Policy issued by the Government of India when handling export and import transactions, including merchanting trade.
- PRAVAAH Portal: All references from ADs to the Reserve Bank of India must now be sent through the dedicated PRAVAAH portal.
- Reporting Doubtful Transactions: Any doubtful transaction encountered by an AD must be promptly reported to the Directorate of Enforcement (DoE).
- Supersession: With the effectiveness of these new directions, the existing Master Direction – Export of Goods and Services and Master Direction – Import of Goods and Services, along with numerous other circulars listed in the Annex, will stand superseded. This signifies a major consolidation and simplification effort.
Exam Relevance
- New Regulations Name: The "Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026". Exam Insight: Questions often test the exact name of significant new regulations.
- Effective Date: These regulations become effective from October 01, 2026. Exam Insight: Dates, especially effective dates of major policy changes, are high-yield questions.
- Primary Objective: To promote ease of doing business, specifically for small exporters and importers, and to empower Authorised Dealers (ADs). Exam Insight: Understanding the 'why' behind a regulation is crucial for conceptual questions.
- RBI Communication Channel: All references from ADs to RBI must now be through the PRAVAAH portal. Exam Insight: New digital platforms and portals introduced by RBI are common exam topics.
- Reporting Compliance: Doubtful transactions must be reported to the Directorate of Enforcement (DoE). Exam Insight: Knowledge of regulatory reporting bodies and requirements is important.
- Regulatory Impact: This circular supersedes existing Master Directions and numerous previous circulars, indicating a significant consolidation and simplification of foreign trade regulations. Exam Insight: The concept of supersession and simplification is important to grasp the broader regulatory trend.
Summary Table
| Feature | Details |
|---|---|
| Circular Number | RBI/2025-26/194 A.P. (DIR Series) Circular No. 20 |
| Date of Issue | January 16, 2026 |
| Effective Date | October 01, 2026 |
| Key Change | Introduction of consolidated "Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026" superseding prior fragmented instructions. |
| Primary Objective | Promote ease of doing business, empower ADs for quicker service. |
| New Requirement | All AD references to RBI via PRAVAAH portal. Report doubtful transactions to Directorate of Enforcement (DoE). |
| Supersedes | Master Direction – Export of Goods and Services, Master Direction – Import of Goods and Services, and various circulars. |
Interest Subvention for Pre- and Post- Shipment Export Credit under Export Promotion Mission (EPM) – Niryat Prothsahan
Background
The Reserve Bank of India (RBI) circular notifies various financial institutions about a new scheme introduced by the Government of India. This scheme, named 'Niryat Prothsahan', is part of the broader Export Promotion Mission (EPM) and aims to support exporters by providing interest subvention on their pre- and post-shipment export credit. Interest subvention essentially means the government will bear a part of the interest cost, making credit cheaper for exporters and thereby boosting exports.
Key Decision
The Government of India has launched the 'Niryat Prothsahan' scheme on a pilot basis under its Export Promotion Mission (EPM). The RBI's role is to ensure that eligible lending institutions – including most commercial banks (excluding RRBs), co-operative banks, and all-India financial institutions – implement this scheme correctly. These institutions must provide interest subvention to eligible exporters strictly in accordance with the operational instructions issued by the Directorate General of Foreign Trade (DGFT) through their Trade Notices. The banks are also responsible for ensuring claims are submitted accurately and only for eligible export credit.
Exam Relevance
- Scheme Name: The scheme is called 'Niryat Prothsahan'. Exam Insight: Questions often ask for the specific name of government schemes aimed at economic promotion.
- Parent Mission: It falls under the Export Promotion Mission (EPM). Exam Insight: Understanding the overarching program helps in classifying new initiatives.
- Nature of Scheme: It is implemented on a pilot basis. Exam Insight: Note if a scheme is pilot, permanent, or extended, as this indicates its stage of implementation.
- Beneficiaries: The scheme targets eligible exporters through interest subvention on pre- and post-shipment export credit. Exam Insight: Focus on who benefits and the specific type of credit involved.
- Implementing Authority: The operational instructions are issued by the Directorate General of Foreign Trade (DGFT). The RBI circular ensures banks comply. Exam Insight: Distinguish between the policy-making body (GOI), the operational instruction issuer (DGFT), and the regulator ensuring implementation (RBI).
- Applicable Institutions: This applies to All Scheduled Commercial Banks (excluding Regional Rural Banks), Primary (Urban) Co-operative Banks, State Co-operative Banks, and All-India Financial Institutions. Exam Insight: Knowing which financial institutions are covered or excluded is a common exam question.
Summary Table
| Feature | Details |
|---|---|
| Circular Title | Interest Subvention for Pre- and Post- Shipment Export Credit under Export Promotion Mission (EPM) – Niryat Prothsahan |
| Circular Date | January 19, 2026 |
| Scheme Name | Niryat Prothsahan |
| Parent Program | Export Promotion Mission (EPM) |
| Credit Type | Pre- and Post- Shipment Export Credit |
| Status | Pilot basis |
| Operational Org. | Directorate General of Foreign Trade (DGFT) - via Trade Notice No. 20/2025-26 & No. 22/2025-26 |
| RBI Role | Notifying banks for strict implementation |
| Applicability | Scheduled Commercial Banks (excluding RRBs), Primary (Urban) Co-operative Banks, State Co-operative Banks, All-India Financial Institutions |
Reserve Bank of India (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026 (Forced ID 13281)
Background
The Reserve Bank of India (RBI) frequently updates its regulatory framework to align with new legislative changes and evolving financial market dynamics. This circular, dated January 22, 2026, amends the existing Reserve Bank of India (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025 (dated November 28, 2025). These amendments are necessitated by the enactment of the Banking Laws (Amendment) Act, 2025, and subsequent rules and regulations published in late 2025 and early 2026. The objective is to standardize and update the terminology and reporting requirements for commercial banks regarding CRR and SLR.
Key Decisions
The RBI has issued these amendment directions under its powers conferred by Section 35A of the Banking Regulation Act, 1949, Section 42 of the RBI Act, 1934, and Sections 18 and 24 of the Banking Regulation Act, 1949. These amendments are effective immediately from January 22, 2026, and primarily focus on updating definitions and reporting fields:
-
Expanded Definition of Development Financial Institutions (DFIs):
- Paragraph 19 (1): The phrase "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" has been inserted. This broadens the scope of DFIs beyond explicitly named ones.
- Annex I (Form A) & Annex II (Form VIII): The specific names like "National Bank for Agriculture and Rural Development, Export Import Bank of India" have been replaced with a more comprehensive list including "the Exim Bank, the National Housing Bank, the National Bank (NABARD), the Small Industries Bank (SIDBI), the National Bank for Financing Infrastructure and Development (NaBFID) or the other development financial institution". This ensures consistency with the amended laws and includes a wider range of key development financial institutions.
-
Minor Clarification in Reporting:
- Paragraph 28 (6) (v): The words 'under "Cash in hand"' have been deleted, suggesting a refinement in how certain cash components are reported or interpreted.
-
Standardization of Terminology:
- Annex II (Form VIII): The word "specified" has been substituted with "notified", and the words "from time to time" have been deleted. This aims to standardize legal terminology across regulations.
-
Inclusion of Standing Deposit Facility (SDF) in Reporting:
- Annex II (Form VIII): A crucial new item, "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme", has been inserted. This formalizes the reporting of funds parked by banks under the SDF, reflecting its increasing importance as a liquidity management tool.
Exam Relevance
- Circular Dates and Numbers: The circular number RBI/2025-26/197 and the date January 22, 2026, are important to remember. Exam Insight: Questions often ask for the specific date of a major circular or its unique identification number.
- Amending Act: The Banking Laws (Amendment) Act, 2025, is the legislative force behind these changes. Exam Insight: Understanding the underlying legal framework for RBI regulations is crucial, as the name of the enabling act can be directly questioned.
- Expanded DFI Definition: Be aware of the broader list of institutions now explicitly recognized or included under "development financial institutions" for CRR/SLR purposes (e.g., Exim Bank, NHB, NABARD, SIDBI, NaBFID). Exam Insight: Questions can test your knowledge of which institutions are categorized as DFIs or if a specific DFI is included in such regulatory frameworks.
- Standing Deposit Facility (SDF): Its inclusion in Annex II (Form VIII) for reporting is a key takeaway. Exam Insight: SDF is a relatively recent liquidity management tool. Questions are highly likely to test its purpose, operation, and now, its formal integration into bank reporting.
- Legal Powers: The powers under which RBI issues such directions (Section 35A BR Act, Section 42 RBI Act, Sections 18 & 24 BR Act) are foundational. Exam Insight: Knowing the specific sections of acts that empower RBI for monetary and banking regulation is fundamental for static GK and banking awareness.
Summary Table
| Feature | Before (RBI Directions, 2025) | After (Amendment Directions, 2026) |
|---|---|---|
| DFI Definition | "National Bank for Agriculture and Rural Development, Export Import Bank of India" explicitly named. | Broadened to include Exim Bank, NHB, NABARD, SIDBI, NaBFID, and "other development financial institutions" as per RBI Act Section 2 (cccii). |
| Cash in Hand Text | Phrase 'under "Cash in hand"' present in para 28 (6) (v). | Phrase deleted. |
| Reporting Terminology | Used "specified" and "from time to time". | Substituted with "notified" and deleted "from time to time". |
| SDF Reporting | Not explicitly mentioned in Annex II (Form VIII). | New item "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme" inserted in Annex II (Form VIII). |
| Effective Date | N/A (Previous Directions) | January 22, 2026 (with immediate effect). |
Reserve Bank of India (Small Finance Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Amendment Directions, 2026
Background
This circular, issued on January 22, 2026, by the Reserve Bank of India (RBI), introduces amendments to the existing Reserve Bank of India (Small Finance Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025 (dated November 28, 2025). These changes are necessitated by recent legislative developments, specifically the enactment of the Banking Laws (Amendment) Act, 2025, the Banking Regulation (Companies) Amendment Rules, 2025, and the Reserve Bank of India Scheduled Banks' (Amendment) Regulations 2025, which were published in the Gazette of India in December 2025 and January 2026.
Key Decision
The RBI, exercising its powers under various sections of the Banking Regulation Act, 1949, and the RBI Act, 1934, has modified the regulations governing Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) for Small Finance Banks (SFBs). These amendments are effective immediately.
The key modifications are as follows:
- Expanded Definition of DFIs: In paragraph 19(1) of the 2025 Directions, the scope has been broadened to include "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934". This ensures a more comprehensive understanding of entities relevant to CRR/SLR compliance.
- Refinement in Cash Reporting: The phrase 'under "Cash in hand"' has been deleted from paragraph 28(6)(v), streamlining specific reporting instructions.
- Broadened Reporting for CRR (Form A): Annex I (Form A), which pertains to CRR reporting, now requires SFBs to include a wider range of institutions. The previous mention of "National Bank for Agriculture and Rural Development, Export Import Bank of India" has been replaced with a more extensive list: "the Exim Bank, the National Housing Bank, the National Bank, the Small Industries Bank, the National Bank for Financing Infrastructure and Development or the other development financial institution".
- Enhanced Reporting for SLR (Form VIII): Similarly, Annex II (Form VIII), used for SLR reporting, has been updated. The previous mention of "Export-Import Bank of India and National Bank for Agriculture and Rural Development" has been substituted with "Exim Bank, National Bank, National Housing Bank, Small Industries Bank, National Bank for Financing Infrastructure and Development and other development financial institutions as defined in section 2 (cccii) of the Reserve Bank of India Act, 1934".
- Terminology Update: Within Annex II (Form VIII), the word "specified" has been replaced with "notified", and the phrase "from time to time" has been removed, enhancing clarity.
- Inclusion of Standing Deposit Facility (SDF): A new item, "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme", has been explicitly inserted into Annex II (Form VIII). This ensures that SFBs clearly report any funds placed under the SDF scheme.
Exam Relevance
- SFB Specific Regulations: These amendments are specifically tailored for Small Finance Banks. Why it matters for exam: Questions often test specific regulatory frameworks applicable to different categories of banks (e.g., SFBs, Payment Banks, Commercial Banks).
- CRR and SLR Fundamentals: The circular directly relates to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Why it matters for exam: A strong understanding of CRR and SLR, their components, and reporting mechanisms is fundamental for banking exams.
- Development Financial Institutions (DFIs): The expanded list of DFIs now explicitly included in reporting (e.g., Exim Bank, NABARD, National Housing Bank (NHB), Small Industries Bank (SIDBI), National Bank for Financing Infrastructure and Development (NaBFID)) is important. Why it matters for exam: Knowing the key DFIs in India and their roles is frequently tested.
- Standing Deposit Facility (SDF): The explicit requirement to report amounts deposited under the Standing Deposit Facility Scheme in Form VIII for SLR is a notable update. Why it matters for exam: SDF is a crucial tool of monetary policy, and its specific inclusion in SFB reporting can be a direct question.
- Regulatory Powers: The circular cites Section 35A of the Banking Regulation Act, 1949, and Section 42 of the RBI Act, 1934, as enabling provisions. Why it matters for exam: Questions often focus on the legal sections empowering the RBI to issue such directives.
- Effective Date: The changes are effective with immediate effect from January 22, 2026. Why it matters for exam: Exact dates of implementation or notification are common factual questions.
Summary Table
| Aspect | Before Amendment (Referencing 2025 Directions) | After Amendment (January 22, 2026) |
|---|---|---|
| Circular Number & Date | RBI/2025-26/198, DOR.RET.REC.395/12.01.001/2025-26, January 22, 2026 | |
| Paragraph 19(1) (DFIs) | Did not explicitly include "other development financial institutions". | "other development financial institutions as defined in section 2 (cccii) of the RBI Act, 1934" inserted. |
| Paragraph 28(6)(v) | Included phrase '"Cash in hand"'. | Phrase '"Cash in hand"' deleted. |
| Annex I (Form A) - Reporting Institutions (CRR) | "National Bank for Agriculture and Rural Development, Export Import Bank of India". | "the Exim Bank, the National Housing Bank, the National Bank, the Small Industries Bank, the National Bank for Financing Infrastructure and Development or the other development financial institution". |
| Annex II (Form VIII) - Reporting Institutions (SLR) | "Export-Import Bank of India and National Bank for Agriculture and Rural Development". | "Exim Bank, National Bank, National Housing Bank, Small Industries Bank, National Bank for Financing Infrastructure and Development and other development financial institutions as defined in section 2 (cccii) of the Reserve Bank of India Act, 1934". |
| Annex II (Form VIII) - Terminology | Used "specified" and "from time to time". | "specified" substituted with "notified"; "from time to time" deleted. |
| Annex II (Form VIII) - New Item | Did not explicitly list Standing Deposit Facility. | New item "Amount deposited with the Reserve Bank, under Standing Deposit Facility Scheme" inserted. |
| Effective Date | (Original 2025 directions) | Immediate effect from January 22, 2026. |
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