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In-depth analysis of RBI Circulars for December 2026
RBI Circulars December 2025
This lesson covers the key regulatory updates and circulars issued by the Reserve Bank of India in December 2025.
1. Submission of ‘LRS Daily Return’ by Authorised Dealers - Category-II banks/entities and Full-Fledged Money Changers (FFMCs)
Subject: Submission of ‘LRS Daily Return’ by Authorised Dealers - Category-II banks/entities and Full-Fledged Money Changers (FFMCs).
Background
- Currently, AD Category-I banks submit the 'LRS daily return' on the Centralised Information Management System (CIMS) on a T+1 basis.
- They were previously required to include transactions representing AD Category-II banks/entities and FFMCs.
New Decision
- Direct Reporting: AD Category-II banks/entities and FFMCs will now submit the ‘LRS daily return’ directly by accessing CIMS.
- Purpose: To enable these entities to check the cumulative amount remitted by a resident individual (PAN-wise) during the current financial year before facilitating a transaction.
- Effective Date: January 01, 2026.
- Discontinuation: They may discontinue submitting LRS transactions through AD Category-I banks.
About Liberalised Remittance Scheme (LRS)
The Liberalised Remittance Scheme (LRS) is a facility provided by the Reserve Bank of India that allows resident individuals to remit foreign exchange for permissible transactions.
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RBI Circulars December 2025
This lesson covers the key regulatory updates and circulars issued by the Reserve Bank of India in December 2025.
1. Submission of ‘LRS Daily Return’ by Authorised Dealers - Category-II banks/entities and Full-Fledged Money Changers (FFMCs)
Subject: Submission of ‘LRS Daily Return’ by Authorised Dealers - Category-II banks/entities and Full-Fledged Money Changers (FFMCs).
Background
- Currently, AD Category-I banks submit the 'LRS daily return' on the Centralised Information Management System (CIMS) on a T+1 basis.
- They were previously required to include transactions representing AD Category-II banks/entities and FFMCs.
New Decision
- Direct Reporting: AD Category-II banks/entities and FFMCs will now submit the ‘LRS daily return’ directly by accessing CIMS.
- Purpose: To enable these entities to check the cumulative amount remitted by a resident individual (PAN-wise) during the current financial year before facilitating a transaction.
- Effective Date: January 01, 2026.
- Discontinuation: They may discontinue submitting LRS transactions through AD Category-I banks.
About Liberalised Remittance Scheme (LRS)
The Liberalised Remittance Scheme (LRS) is a facility provided by the Reserve Bank of India that allows resident individuals to remit foreign exchange for permissible transactions.
Key Features
- Introduction Date: February 4, 2004
- Limit: USD 2,50,000 per financial year (April – March)
- Frequency: No restriction on the frequency of remittances within the annual limit
- Eligible: Resident individuals (including minors). Not available to corporates, HUF, Trusts, etc.
Mandatory Requirements
- PAN Card: It is mandatory for a resident individual to provide their Permanent Account Number (PAN) for all transactions under LRS made through Authorised Persons.
Permissible Transactions
Current Account Transactions
- Private visits abroad
- Gifts and donations
- Employment abroad
- Emigration
- Maintenance of close relatives abroad
- Medical treatment abroad
- Studies abroad (higher education)
Capital Account Transactions
- Opening a foreign currency account with a bank abroad
- Acquisition of immovable property abroad
- Investment in overseas direct investment (ODI) or overseas portfolio investment (OPI)
- Extending loans in INR to Non-Resident Indian (NRI) relatives
Reinvestment and Repatriation Rules
- Retain and Reinvest: An investor may retain and reinvest the income earned from investments made abroad under the LRS.
- Repatriation Requirement: Any foreign exchange received (such as dividends, interest, or proceeds from sale) but not reinvested must be brought back to India and surrendered to an authorised person within 180 days, as applicable.
Exceeding the Annual Limit
If a resident individual needs to remit an amount exceeding USD 2,50,000 in a financial year, such remittances can be made only with prior approval of the RBI.
Prohibited Transactions
Remittances under LRS are not permitted for:
- Lottery tickets, sweepstakes
- Margin calls for overseas exchanges/markets
- Trading in foreign exchange abroad
- Remittances to countries identified by FATF as non-cooperative
- Remittances to individuals/entities identified as posing significant risk of terrorism financing
2. Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Amendment Directions, 2025
Subject: Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Amendment Directions, 2025.
Key Amendments
- Definition: "Digital Payment Transaction" included as "Electronic Funds Transfer" under PSS Act, 2007.
- Objective: To provide affordable banking facilities to the public driven by enhanced usage.
- Effective Date: April 1, 2026.
Minimum Free Facilities (No Minimum Balance Required)
- Cash Deposit: Unlimited number and value.
- Receipt of Money: Via electronic channel or cheque deposit.
- ATM Card: Free ATM-cum-Debit Card (No annual/renewal fee).
- Cheque Book: Minimum 25 cheque leaves per year.
- Digital Banking: Free Internet and mobile banking.
- Passbook: Free passbook or monthly email statement.
- Withdrawals: Minimum of four (4) free withdrawals per month (including ATM and transfers).
- Important Exclusion: Digital payment transactions (NEFT, RTGS, UPI, IMPS, POS) shall NOT be counted as withdrawals for this limit.
Additional Guidelines
Account Opening Requirements
- No Minimum Deposit: While opening a Basic Savings Bank Deposit (BSBD) Account, a bank shall not impose any requirement of an initial minimum deposit. This ensures that the account is accessible to all sections of society, particularly those with limited financial resources.
Account Conversion
- Conversion Timeline: A customer may convert their existing savings bank account to a BSBD account. The bank shall convert the existing savings bank account to BSBD account within 7 days of receiving the request.
- Swift Processing: This timeline ensures quick conversion without unnecessary delays, making it easier for customers to access the benefits of BSBD accounts.
One Account Rule
- Restriction: A holder of a BSBD account cannot hold any other savings account in the same bank or any other bank.
- Purpose: This rule ensures that the benefits of BSBD accounts are targeted towards those who genuinely need basic banking facilities without multiple accounts.
- Consequence: If Ramesh already holds a BSBD Account in Bank A and approaches Bank B to open a new BSBD account, Bank B cannot open a new BSBD account for Ramesh.
Optional Facilities
- Non-Mandatory: Banks cannot insist that customers avail optional facilities (such as cheque book or internet banking) at the time of account opening. Customers have the freedom to choose additional services based on their needs.
3. Reserve Bank of India (Commercial Banks – Credit Information Reporting) Amendment Directions, 2025
Subject: Reserve Bank of India (Commercial Banks – Credit Information Reporting) Amendment Directions, 2025.
What are Credit Information Companies?
Credit Information Companies (CICs) collect data on individuals' and companies' loans, credit cards, and payment histories from banks and lenders. They compile this information into credit reports, which banks and Non-Banking Financial Companies (NBFCs) use to assess borrowers' creditworthiness.
RBI-Approved CICs in India (as of 2025)
There are four major RBI-approved Credit Information Companies in India:
- TransUnion CIBIL (Credit Information Bureau (India) Limited)
- Experian
- Equifax
- CRIF High Mark
These CICs play a crucial role in:
- Maintaining credit histories of borrowers
- Providing credit scores and reports
- Helping lenders make informed lending decisions
- Promoting financial discipline among borrowers
Reporting Timelines (Effective July 01, 2026)
Credit Institutions (CIs) must update Credit Information Companies (CICs) as follows:
- Fortnightly & Monthly Reporting: on the 9th, 16th, 23rd, and last day of each month.
- Full File: Submitted by the 5th of the next month (status as of last day of month).
- Incremental Files: Submitted within 4 calendar days of the 9th, 16th, and 23rd.
- Incremental accounts include: New accounts, Closed accounts, Changes in status/balance, Overdue accounts.
Data Quality & Monitoring
- DAKSH Reporting: CICs must report CIs failing submission timelines to RBI twice a year (by March 31 and September 30).
- CKYC: CIs must report the Central KYC number to CICs.
Data Quality Index (DQI)
- File-Level DQI: CICs shall provide file level Data Quality Index (DQI) for all reporting segments (Consumer, Commercial, and Microfinance) for all files to the concerned CI within 3 calendar days of their receipt.
- CI-Level DQI: CICs shall provide CI-level DQI to the concerned CI for all reporting segments on a monthly basis by the 10th day of the next month.
- Purpose: DQI helps Credit Institutions monitor and improve the quality of data they submit to CICs, ensuring accurate credit reporting.
Rejection Reports
- Processing Time: A CIC shall process the full file and weekly incremental file as per the data acceptance rules and share any rejection report with the concerned CI within 3 calendar days of receiving the data.
- Resubmission: Rejected data must be corrected and re-submitted by the next reporting cycle to maintain data integrity.
4. Reserve Bank of India (Urban Co-operative Banks – Licensing, Scheduling and Regulatory Classification) Guidelines, 2025
Subject: Reserve Bank of India (Urban Co-operative Banks – Licensing, Scheduling and Regulatory Classification) Guidelines, 2025.
A. Licensing
- RBI is not considering new proposals to set up new UCBs or convert societies into UCBs.
B. Regulatory Categorization (4 Tiers)
Based on deposits as of March 31 of previous FY:
- Tier 1: This includes all unit UCBs (those with a single branch/office) and salary earners’ UCBs, regardless of their deposit size. It also includes all other UCBs with deposits up to ₹100 crore.
- Tier 2: Deposits > ₹100 crore to ₹1000 crore.
- Tier 3: Deposits > ₹1000 crore to ₹10,000 crore.
- Tier 4: Deposits > ₹10,000 crore.
Tier Transition Compliance
- Upward Movement: If a UCB moves to a higher tier due to an increase in deposits, the bank is allowed up to two years to comply with the higher regulatory requirements.
- Purpose: This transition period provides UCBs adequate time to strengthen their systems, processes, and capital to meet the enhanced regulatory standards.
- Deposits Calculation: Deposits shall be calculated based on the audited balance sheet as on 31 March of the previous financial year.
C. Second Schedule Inclusion
Licensed UCBs (excluding Salary Earners’ Banks) can apply for Second Schedule status if:
- Tier 3 Status: Maintained minimum deposits for Tier 3 for two consecutive years.
- Capital to Risk (Weighted) Assets Ratio (CRAR): At least 3% higher than the minimum requirement.
- No Supervisory Concerns: Based on latest RBI inspection.
5. Master Circular - Basel III Capital Regulations (Perpetual Debt Instruments)
The Context: Banks need to maintain a certain amount of capital (Basel III norms) to stay safe. Part of this capital comes from issuing bonds called Perpetual Debt Instruments (PDIs).
- PDI: A bond that has no maturity date. The bank pays interest forever, but rarely pays back the principal unless they want to.
- The Issue: Banks sometimes raise this money from Foreign Markets (in foreign currency). The RBI sets a limit on this to prevent too much foreign risk.
The New Limit (Memorize This Number)
- Updated Rule: The maximum amount of Foreign Currency PDIs (or Rupee Denominated Bonds issued overseas) that can be counted as Additional Tier 1 (AT1) Capital is:
- 1.5% of Risk Weighted Assets (RWAs).
Effective Date
- This new limit applies from October 01, 2025.
Applicability (Who must follow this?)
- Scheduled Commercial Banks (SCBs).
- Small Finance Banks (SFBs).
- Payments Banks.
- Excluded: Regional Rural Banks (RRBs).
Summary Cheat Sheet for Revision
| Feature | Rule / Limit |
|---|---|
| Loan for purchase of Gold | Prohibited |
| Loan against Primary Gold (Bars) | Prohibited (Generally) |
| Working Capital Exception | Allowed for SCBs & Tier 3/4 UCBs |
| Foreign PDI Limit (Basel III) | 1.5% of RWAs |
| PDI Circular Effective Date | Oct 01, 2025 |
6. Reserve Bank of India (Urban Co-operative Banks - Branch Authorisation) Directions, 2025
The Context: Previously, UCBs had to meet "Financially Sound and Well Managed (FSWM)" norms to open new branches. The RBI has now replaced this with a new set of criteria called "Eligibility Criteria for Business Authorization (ECBA)".
The New Criteria: ECBA (Memorize This!)
To be considered "ECBA Compliant," a UCB must meet ALL the following conditions as of March 31 of the previous year:
| Parameter | Requirement |
|---|---|
| CRAR (Capital) | At least 1% above the minimum required CRAR. |
| Net NPA | Not more than 3%. |
| Profitability | Net Profit in the last 2 Financial Years. |
| Regulatory Compliance | No default in CRR/SLR in current & previous year. |
| Technology | Core Banking Solution (CBS) fully implemented. |
| Governance | At least 2 Professional Directors on the Board. |
| Supervision | Not under any RBI Directions / Supervisory Action/PCA. |
Routes for Opening Branches
If a UCB is ECBA-compliant, it gets more freedom:
A. Automatic Route (No permission needed)
- Limit: Can open new branches up to 15% of existing branches (as of previous year end).
- Min/Max: Minimum 1, Maximum 10 branches per year.
- Condition: Available only only if all existing branches have valid authorization.
B. Prior Approval Route
- Required if the bank wants to open more than 15% branches.
- Process: Submit an Annual Business Plan (ABP). RBI decides within 90 days.
- Revocation: If 75% of approved branches are not opened, RBI may ban expansion for 2 years.
Area of Expansion (Where can they go?)
| Level of Expansion | Who can do it? (ECBA Compliant) | Permission? |
|---|---|---|
| Within Home District | All UCBs | Automatic (No Permit) |
| Within Home State | All UCBs (Max 3 districts outside home district) | Automatic (No Permit) |
| Beyond 3 Districts (State) | Tier 2, 3, 4 (Max 5 districts/year) | Prior Approval |
| Multi-State (New State) | Tier 3, 4 with Net Worth ≥ ₹50 Cr (Max 2 states/year, 5 branches/state) | Prior Approval |
Salary Earners' Banks (SEBs)
- Special Condition: An SEB must ensure there are at least 1,000 members at the proposed branch location.
7. Reserve Bank of India (Rural Co-operative Banks - Branch Authorisation) Directions, 2025
Who does this apply to?: State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs).
Key Rules (Similar to UCBs but with tweaks)
- ECBA Norms: Same as UCBs (CRAR +1%, Net NPA <3%, Net Profit last 2 years, etc.).
- Automatic Route:
- Eligible ECBA-compliant banks can open up to 15% of existing branches (Min 1, Max 10) without RBI approval.
- Location Restrictions (Crucial Difference):
- StCBs: Can open branches only in State Capital + One branch per district (where no DCCB exists).
- DCCBs: Can open branches only in centres with a population of Min 1 Lakh.
8. Central Information System for Banking Infrastructure (CISBI)
The Update: The RBI typically tracks bank branches through a system. This system is now upgraded/rebranded as CISBI.
Reporting Requirements
- Event Reporting: Any opening, closure, shifting, or merger of a branch/office must be reported on the CISBI portal.
- Timeline: Within 7 Days of the event.
- Note: If the event didn't require RBI approval (Automatic Route), report within 15 Days.
- Monthly NIL Report: In the last week of every month, banks must log in and submit a 'NIL Report' to confirm the total number of branches is correct as of the last day of the previous month.
9. Reserve Bank of India (Rural Co-operative Banks – Miscellaneous) (Amendment) Directions, 2025
Display of Bank Name
- Rule: If a bank uses an abbreviation or logo (Brand Building), it must also display its Full Name (as per license) alongside it.
- Font Size: The font size of the Full Name cannot be smaller than the abbreviation/logo.
- Nature: The words "Co-operative Bank" or "Sahakari Bank" must be prominently displayed in equal font size.
10. Reserve Bank of India (Commercial Banks - Concentration Risk Management) Amendment Directions, 2025
Concentration Risk Management (Foreign Banks)
The RBI has tweaked how much risk an Indian branch of a Foreign Bank can take on its own Head Office.
The New Limits (Large Exposures Framework):
- Exposure to Head Office (HO):
- If the Foreign Bank is a G-SIB (Global Systemically Important Bank): Limit is 20% of Capital Base.
- If the Foreign Bank is a Non-G-SIB: Limit is 25% of Capital Base.
Summary Cheat Sheet
| Feature | Details |
|---|---|
| New Authorisation Norm | ECBA (Replaces FSWM) |
| ECBA Capital | CRAR + 1% |
| ECBA NPA | Net NPA ≤ 3% |
| Automatic Branch Limit | 15% of existing branches (Max 10/year) |
| Reporting Portal | CISBI (Report within 7 days) |
| Foreign Bank HO Limit | 20% (if G-SIB) / 25% (if Non-G-SIB) |
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