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In-depth analysis of RBI Circulars for November 2026
RBI Circulars November 2025
This lesson covers the key regulatory updates and circulars issued by the Reserve Bank of India in November 2025.
1. Master Direction – Reserve Bank of India (Repurchase Transactions (Repo) Directions), 2025
This direction consolidates the rules for Repo transactions and officially adds a new type of security that can be used as collateral.
The Major Update (Municipal Bonds)
- The Change: The Central Government has designated Municipal Debt Securities as "eligible securities" for repo and reverse repo transactions.
- Significance: Previously, you could mostly use Govt Securities or Corporate Bonds. Now, bonds issued by Municipal Corporations (like for city infrastructure) can also be used to borrow money in the repo market.
Note: This update was officially notified on October 22, 2025.
Key Definitions & Legal Sections
Important definitions mandated by the RBI Act, 1934 and Govt Securities Act:
- Repo: Defined under Section 45U(c) of the RBI Act, 1934. It is an instrument for Borrowing Funds by selling securities with an agreement to buy them back later.
- Reverse Repo: Defined under Section 45U(d) of the RBI Act, 1934. It is an instrument for Lending Funds by buying securities with an agreement to sell them back later.
- Government Security: Defined under Section 2(f) of the Government Securities Act, 2006.
- Commercial Paper (CP): Unsecured money market instrument (promissory note). Original tenor must be between 7 days to 1 year.
- Tri-Party Repo: A repo contract where a third entity (Tri-Party Agent) acts as an intermediary to handle collateral selection, payment, and settlement.
- Haircut: The difference between the Market Value of the collateral and the Amount Borrowed (Amount Lent).
Eligible Securities (What can be used as Collateral?)
You can now use the following securities for Repo:
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RBI Circulars November 2025
This lesson covers the key regulatory updates and circulars issued by the Reserve Bank of India in November 2025.
1. Master Direction – Reserve Bank of India (Repurchase Transactions (Repo) Directions), 2025
This direction consolidates the rules for Repo transactions and officially adds a new type of security that can be used as collateral.
The Major Update (Municipal Bonds)
- The Change: The Central Government has designated Municipal Debt Securities as "eligible securities" for repo and reverse repo transactions.
- Significance: Previously, you could mostly use Govt Securities or Corporate Bonds. Now, bonds issued by Municipal Corporations (like for city infrastructure) can also be used to borrow money in the repo market.
Note: This update was officially notified on October 22, 2025.
Key Definitions & Legal Sections
Important definitions mandated by the RBI Act, 1934 and Govt Securities Act:
- Repo: Defined under Section 45U(c) of the RBI Act, 1934. It is an instrument for Borrowing Funds by selling securities with an agreement to buy them back later.
- Reverse Repo: Defined under Section 45U(d) of the RBI Act, 1934. It is an instrument for Lending Funds by buying securities with an agreement to sell them back later.
- Government Security: Defined under Section 2(f) of the Government Securities Act, 2006.
- Commercial Paper (CP): Unsecured money market instrument (promissory note). Original tenor must be between 7 days to 1 year.
- Tri-Party Repo: A repo contract where a third entity (Tri-Party Agent) acts as an intermediary to handle collateral selection, payment, and settlement.
- Haircut: The difference between the Market Value of the collateral and the Amount Borrowed (Amount Lent).
Eligible Securities (What can be used as Collateral?)
You can now use the following securities for Repo:
- Government Securities (Central & State)
- Listed Corporate Bonds & Debentures
- Commercial Papers (CPs) & Certificates of Deposit (CDs)
- Units of Debt ETFs
- Municipal Debt Securities (The New Addition)
- Any other local authority securities specified by the Central Govt
Important: Equity Shares and Preference Shares are NOT eligible securities.
Eligible Participants & Non-Applicability
- Allowed: Any Regulated Entity (Banks, NBFCs), Listed Corporates, All India Financial Institutions (Exim Bank, NABARD, SIDBI, NaBFID), and any other RBI-approved entity.
- Excluded: Individual Investors are NOT eligible.
Note: These directions do NOT apply to repo transactions under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF). Means these transactions are not eligible for RBI.
Operational Rules
- Tenor: Minimum 1 Day (Overnight) to Maximum 1 Year.
- Settlement Cycle:
- First Leg: Must settle on T+0 or T+1 basis.
- All trades must settle on a Delivery versus Payment (DvP) basis. DvP is a settlement mechanism which stipulates that transfer of funds from the buyer of securities is made simultaneously with the transfer of securities by the seller.
- Pricing:
- The Second-Leg Price = First-Leg Price + Interest.
- Haircut / Margin:
- Corporate Bonds: Minimum 2%.
- Municipal/Local Authority Securities: Minimum 2%.
- CPs and CDs: Minimum 1.5%.
- Reporting: All repo trades (outside exchanges) must be reported within 15 minutes.
- Govt Securities: Report to CROMS (Clearcorp Repo Order Matching System).
- Corporate Bonds/CPs/CDs: Report to F-TRAC (FIMMDA - Trade Reporting and Confirmation Platform). (FIMMDA means Fixed Income Money Market and Derivatives Association)
Tri-Party Agent Eligibility Criteria
- Regulatory Approval: Must have permission from regulator and no major punitive action in last 5 years.
- Financial: Minimum ₹25 crore paid-up equity capital. Foreign shareholding must follow India's rules.
- Experience: At least 5 years in financial sector (custody, clearing, or settlement).
- Infrastructure: Must have strong and adequate system infrastructure.
Sale, Substitution & Documentation
- Sale: Securities bought under repo can be sold again (outright or repo). Outright sale is allowed only for entities permitted to short-sell.
- Substitution: Securities can be substituted (replaced) with other eligible securities as per clearing agency rules.
- Documentation: Participants must use standard bilateral master repo agreements finalized by FIMMDA.
CRR and SLR Computation
- Borrowing: Funds borrowed via repo in Govt Securities are Exempt from CRR and SLR.
- Lending: Securities acquired under repo are Eligible for SLR (if the security itself is SLR-eligible).
- Corporate Bonds: Funds borrowed against corporate bonds are treated as liabilities for CRR/SLR purposes.
Summary
| Feature | Rule / Limit |
|---|---|
| New Eligible Security | Municipal Debt Securities |
| Minimum Tenor | 1 Day |
| Maximum Tenor | 1 Year |
| Settlement (1st Leg) | T+0 or T+1 |
| Price Calculation | 2nd Leg = 1st Leg + Interest |
| Min Haircut (Corp Bonds) | 2% |
| Min Haircut (CP/CD) | 1.5% |
| Reporting Platform (Govt) | CROMS |
| Reporting Platform (Corp) | F-TRAC |
2. Reserve Bank of India (Trade Relief Measures) Directions, 2025
This set of directions provides temporary relief to export-oriented borrowers who are facing financial stress due to global trade disruptions.
Overview & Applicability
- Objective: To provide relief to Export-oriented borrowers affected by global trade headwinds.
- Applicable Entities (REs): Commercial Banks, Co-operative Banks, NBFCs, AIFIs, CICs.
Eligibility Criteria for Relief
A borrower is eligible only if they meet ALL the following conditions:
- Engaged in Exports: Must be in specific sectors specified by RBI.
- Existing Borrower: Had an outstanding export credit facility as of August 31, 2025.
- Standard Account: The borrower's account was classified as 'Standard' as on August 31, 2025. (NPA accounts are not eligible).
Key Relief Measures
A. Moratorium & Deferment
- Term Loans: Lenders can grant a Moratorium on installments falling due between September 1, 2025 and December 31, 2025.
- Working Capital: Lenders can Defer the recovery of interest applied during this same period.
- Interest Calculation: During this break, interest will continue to accrue but on a Simple Interest basis (No compounding).
- Repayment of Accrued Interest: The accumulated interest can be converted into a Funded Interest Term Loan (FITL) which must be repaid by September 30, 2026 (starting after March 31, 2026).
B. Export Credit Relaxations
- Tenor Extension: The maximum credit period for pre-shipment and post-shipment credit can be extended up to 450 days.
- Packing Credit Liquidation: If an exporter took a packing credit loan (before Aug 31, 2025) but could not ship the goods, they are allowed to repay the loan using alternate sources (like domestic sales).
Asset Classification & Provisioning
- DPD Freeze: The moratorium period is excluded when calculating "Days Past Due".
- Provisioning Rule:
- Banks must create a General Provision of at least 5% of the outstanding amount for these accounts.
- Deadline: By December 31, 2025.
Summary
| Feature | Details |
|---|---|
| Eligibility Cut-off Date | August 31, 2025 |
| Relief Period (Moratorium) | Sept 1, 2025 – Dec 31, 2025 |
| Interest Calculation | Simple Interest |
| FITL Repayment Deadline | September 30, 2026 |
| Max Export Credit Tenor | 450 Days |
| Provisioning Requirement | 5% (General Provision) |
3. Foreign Exchange Management (Export of Goods and Services) (Second Amendment) Regulations, 2025
The RBI has amended the FEMA regulations to provide relief to exporters regarding the timelines for realizing proceeds and shipping goods.
Realisation of Export Proceeds
- The New Rule: The full export value of goods/software/services must be realised and brought back to India within 15 months.
- Change: This is an increase from the earlier limit of 9 months.
Advance Payment against Exports
- Shipment Timeline: If an exporter receives an advance payment, they must ship the goods within 3 years from the date of receipt.
- Previous Limit: 1 year.
- Unused Advance: If the exporter cannot ship the goods within 3 years, they cannot return the unused advance or interest without prior RBI approval.
Summary
| Feature | New Limit | Old Limit |
|---|---|---|
| Realisation Period | 15 Months | 9 Months |
| Shipment against Advance | 3 Years | 1 Year |
| Return of Unused Advance | RBI Approval Needed (after 3 yrs) | - |
4. Amendments to Directions – Compounding of Contraventions under FEMA, 1999
This circular explains how individuals or companies can settle violations of Foreign Exchange laws voluntarily.
What is "Compounding"?
- Authority: The Reserve Bank is empowered to compound contraventions under Section 13 of FEMA, 1999.
- Process: It is a voluntary process. You can apply suo moto or after receiving a Memorandum of Contraventions.
Fees & Deadlines
- Application Fee: ₹10,000 plus GST.
- Processing Time: RBI must pass an order within 180 Days of receiving the complete application.
- Payment Deadline: The applicant must pay the compounding amount within 15 Days of the order.
- Application Mode: Physically or through the PRAVAAH Portal.
Penalties & Fines
Maximum Legal Penalty (if not compounded):
- Up to 3 times (300%) the sum involved (if quantifiable).
- Up to ₹2 Lakh (if not quantifiable).
- Continuing Default: Additional ₹5,000 per day.
Compounding Limits:
- Max amount payable: 300% of the sum involved.
- Cap for non-reporting contraventions: ₹2,00,000.
- Small Contraventions (< ₹1 Lakh):
- Reporting errors: Simple interest at 5% p.a.
- Other contraventions: Simple interest at 10% p.a.
Important Rules
- The "3-Year Rule": If a person commits a similar contravention within 3 years of a previous compounding, they are NOT eligible for compounding again.
- Payment Update: RBI has changed the bank account details for receiving fees/amounts via NEFT/RTGS.
Summary
| Feature | Rule / Limit |
|---|---|
| Empowering Section | Section 13 |
| Application Fee | ₹10,000 + GST |
| RBI Processing Time | 180 Days |
| Payment Deadline | 15 Days |
| Ineligibility Window | Within 3 Years of previous |
| Max Penalty (Quantifiable) | 300% (3 times) |
| Max Penalty (Non-Quantifiable) | ₹2 Lakh |
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