RBI master-direction RBI/DOR/2025-26/325 · 28 Nov 2025
Official title
Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025 (Updated as on July 01, 2026)
Summary
Check the official recordThe Reserve Bank of India establishes a framework for credit risk management by All India Financial Institutions (AIFIs). AIFIs must implement a Board-approved policy covering lending to related parties, Legal Entity Identifier (LEI) requirements, security interest filings, and revolving credit restrictions. The Directions prohibit AIFIs from granting loans against their own shares or to their directors, with specific exceptions. AIFIs must ensure non-individual borrowers with aggregate exposure of ₹5 crore or more obtain an LEI code. Furthermore, AIFIs must register security interests in immovable, movable, and intangible assets with CERSAI. The Directions also restrict working capital finance and revolving underwriting facilities. These rules apply to EXIM Bank, NABARD, SIDBI, NHB, and NaBFID.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/325 DOR.CRE.REC.244/07-02-007/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025 (Updated as on July 01, 2026)
Table of Contents Chapter I - Preliminary Chapter II - Board Approved Policies Chapter II-A – Credit Risk Evaluation Chapter III - [Deleted] Chapter IIIA - Regulatory Restrictions Chapter IV - Legal Entity Identifier (LEI) for Borrowers Chapter V - Filing of Security Interest relating to Immovable (other than equitable mortgage), Movable, and Intangible Assets in CERSAI Chapter VI - Working Capital Finance and Revolving Facility Chapter VII - Repeal and other provisions
Introduction All India Financial Institutions (AIFIs), in the course of financial intermediation, are exposed to various financial and non-financial risks, of which credit risk is the one of the most significant risks. If not managed effectively, credit risk may have ramifications for a range of other risk categories too. As credit exposures of AIFIs encompass varied sectors, borrower types and products with their own idiosyncratic complexities as well as systemic implications due to interconnectedness among themselves, credit risk management of AIFIs involve a range of prudential tools, including statutory and regulatory restrictions / prohibitions on certain activities. Recognising this, the Reserve Bank has, from time to time, issued guidelines to strengthen credit risk management practices.
Accordingly, in exercise of the powers conferred by section 45L of the Reserve Bank of India Act, 1934 and all other provisions / laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.
These Directions shall be called the Reserve Bank of India (All India Financial Institutions – Credit Risk Management) Directions, 2025.
These Directions shall come into effect immediately upon issuance.
(i) ‘Bank Guarantee’ shall mean financial and performance guarantees issued by banks on behalf of their clients. A financial guarantee assures payment of money in the event of non-fulfilment of contractual obligations by the client. A performance guarantee provides assurance of compensation if there is delayed or inadequate performance on a contract. A deferred payment guarantee assures payment of instalments due to a supplier of goods.
(ii) ‘Bills Purchased and Discounted’ shall mean negotiable instruments that give the holder the right to receive stated fixed sums on demand or at a fixed or determinable future time. When a bank negotiates a bill payable on demand (sight bill) and provides funds to the holder, at a fee/ interest, the facility is referred to as bill purchase. When a bank negotiates bill payable after a usance i.e., at a fixed or determinable future time (usance bill) and provides funds to the holder, at a discount, the facility is referred to as bill discounting. Bills purchased and discounted can be Inland Bills and Foreign Bills. Inland Bills are Bills of Exchange drawn in India and paid in India to a person in India.
1 [(iia) Committee on lending to related parties’ shall mean a committee established by the Board of the AIFI specifically to deal with lending to related parties. AIFIs may also identify any existing Committee, other than the Audit Committee, for this purpose. (iib) ‘Contract or arrangement’ shall have the same meaning as specified in Section 188(1)(a) to (g) of the Companies Act, 2013. (iic) ‘Control’ shall have the same meaning as assigned to it under Section 2(27) of the Companies Act, 2013. (iid) ‘Director of an AIFI’ or ‘any other entity’ shall mean a director appointed / elected to the Board of the entity and would include a nominee director and an independent director. (iie) ‘Entity’ in the context of a ‘related party’ shall mean a ‘person’ other than an individual and a Hindu Undivided Family. (iif) ‘Key Managerial Personnel (KMP)’ of a AIFI shall have the same meaning as defined in Section 2(51) of the Companies Act, 2013. (iig) ‘Lending’ in the context of a ‘related party’ shall mean extending funded or/ and non-fund-based credit facilities to related parties. While investments in debt instruments of related parties shall be covered for this purpose, equity investments shall be excluded.]
(iii) ‘Letter of Credit (LC)’ shall mean any arrangement how so ever named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation. An LC confirmed by a bank based and operating in another country is payable by the confirming bank.
2 [(iiia) ‘Person’ shall have the same meaning as assigned to it under Section 3(23) of Part I of Insolvency and Bankruptcy Code (IBC), 2016. (iiib) ‘Personal Loan’ shall have the same meaning as defined under Banking Statistics (Harmonised Definitions) (iiic) ‘Promoter’ shall have the same meaning as assigned to it under Section 2(69) of the Companies Act, 2013. (iiid) ‘Reciprocally Related Person’ means an individual who is either (i) a director (excluding independent director / Nominee director appointed by the Government or RBI or a statutory body) of another commercial bank, or an AIFI, or a scheduled cooperative bank, or a subsidiary of a commercial bank; or (ii) a trustee of a mutual fund or an alternate investment fund established by any of the aforesaid regulated entities; or (iii) a relative of such a director or a trustee. (iiie) Related Party’ with respect to an AIFI shall mean a related person, a reciprocally related person, or any of the following entities: (a) where a related person or a reciprocally related person is a partner, manager, KMP, director or a promoter; or (b) where a related person or a reciprocally related person is a shareholder with more than ten per cent of paid-up equity share capital; or (c) where a related person or a reciprocally related person is having control, whether singly or jointly with another person; or (d) where a related person or a reciprocally related person controls more than twenty per cent of voting rights on account of ownership or through a voting agreement or through any other arrangement; or (e) where a related person or a reciprocally related person has the power to nominate a director to its Board; or (f) which is accustomed to act on the advice, direction, or instruction of a related person or a reciprocally related person; or (g) where a related person or a reciprocally related person is a guarantor or a surety; or (h) where a related person or a reciprocally related person is a trustee or an author or a beneficiary and where the entity is in the form of a private trust. (i) which is related to the related person or a reciprocally related person as a subsidiary or a parent company or a holding company or an associate or a joint venture. Provided that, nothing in sub-clause (e) above shall apply in cases where the authority to nominate a director arises exclusively from a lending or financing arrangement. Provided further that, nothing in sub-clause (f) above shall apply to the advice, directions or instructions given in a professional capacity. Provided further that, Government of India / State Government-owned or controlled entities shall not be treated as related parties to a AIFI just by virtue of the fact that the Government has the common ownership or control of such entities. (iiif) ‘Related Person’ with respect to an AIFI shall mean a person, and the relatives of such a person, where the person: (a) is either a promoter, or a director, or a KMP of the AIFI; or (b) owns more than five per cent of paid-up equity share capital of the AIFI or can, either singly or jointly, exercise more than five per cent of the voting rights of the AIFI on account of either ownership or voting agreement or through shareholders’ agreement or through any other arrangement; or (c) can, through an agreement with the AIFI, nominate a director to its Board; or (d) is either singly or jointly, in control of the AIFI;]
