Commercial Banks Concentration Risk Management Directions

RBI/DOR/2025-26/158 DOR.CRE.REC.77/07-03-001/2025-26 November 28, 2025

Previous Versions

Reserve Bank of India (Commercial Banks - Concentration Risk Management) Directions, 2025 (Updated as on July 01, 2026)

Table of Contents

• Chapter I - Preliminary
• Chapter II – Role of the Board
• Chapter III - Large Exposures Framework
• Chapter IV - Enhancing Credit Supply for Large Borrowers through Market Mechanism
• Chapter V - Exposure Norms
• Chapter VI - Prudential Limits on Intra-Group Transactions and Exposure
• Chapter VII – Management of Country Risk Exposure
• Chapter VIII - Prudential Limits for Inter-Bank Liabilities (IBL)
• Chapter IX - Repeal and other provisions
• Annex - I
• Annex - II

Introduction

The concentration of a bank’s exposures to a single counterparty or a group of connected counterparties poses significant risks. The Reserve Bank of India (RBI), recognizing the imperative of robust risk management, therefore introduced prudential exposure limits in March 1989. These limits restricted banks’ exposures to individual borrower and group borrowers to a certain percentage of capital funds, laying the foundation for mitigating concentration risk on assets side of their balance sheets. Cognizant of the concentration risk on the liability side of the balance sheet, the RBI introduced Prudential Limits for Inter-Bank Liabilities in 2007 further strengthening its comprehensive approach on concentration risk management. Subsequently, guided by evolving international standards, including the Basel Committee on Banking Supervision’s (BCBS) guidance on ‘Measuring and Controlling Large Credit Exposures’ (1991) and subsequent Core Principles for Effective Banking Supervision (2006, revised in 2024), the RBI aligned its framework with global best practices. This culminated in the adoption of the BCBS’s ‘Supervisory Framework for Measuring and Controlling Large Exposures’ (2014), which was adopted for Indian Scheduled Commercial Banks in 2019. In addition to the prudential measures on concentrations to counterparties, and recognizing the need for sectoral diversification, the RBI has also mandated regulatory exposure limits for capital market exposures and advised banks to establish their own sector-specific thresholds for other sectors.

Accordingly, in exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.

Chapter I - Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Commercial Banks - Concentration Risk Management) Directions, 2025.
2. These Directions shall come into effect immediately upon issuance.

B. Applicability

3. These Directions shall be applicable to Commercial Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').

For the purpose of these Directions, “Commercial Banks” mean banking companies (other than Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as defined respectively under clauses (c), (da) and (nc) of Section 5 of the Banking Regulation Act,1949.

C. Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meaning assigned to them in the ensuing paragraphs.

(1) 1 [] (2) 2 [] 3 [(2A) "Acquisition Finance" shall have the same meaning as defined in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025. (2B) "Bridge Finance" shall have the same meaning as defined in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025. (2C) "Capital Market Intermediaries (CMIs)" shall have the same meaning as defined in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025. (2D) "Collateral Security" or "Collateral" shall have the same meaning as defined in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.]

(3) 4 “Eligible capital base” means the effective amount of Tier 1 capital fulfilling the criteria defined in the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025, as per the last audited balance sheet. However, the infusion of capital under Tier I after the published balance sheet date may also be taken into account. A bank shall obtain an external auditor’s certificate on completion of the augmentation of capital and submit the same to the RBI (DOS, CO) before reckoning the additions to capital funds. Further, for an Indian bank, profit accrued during the year, subject to provisions contained in Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025, shall also be reckoned as Tier I capital for this purpose.

(4) 5 [*****]

(5) “Group” for the purpose of intragroup transactions and exposures (ITE) shall have the following definition:

(i) “Group” shall be defined as an arrangement involving two or more entities related to each other through any of the following relationships (subsidiary, associate, joint venture and related party as defined in the applicable accounting standards) and a 'group entity' as any entity involved in this arrangement.

(ii) Entities considered under the definition of ‘Group Entities’ (a) Subsidiary – Parent. (b) Associate. (c) Joint Venture. (d) Related Party (including structures such as SPV / SIV / conduits based upon the actual ownership / control / significant influence / beneficial interest). (e) Direct or indirect ownership of 20 percent or more interest in the voting power of the enterprise. If exercise of voting power is restricted by statutory / regulatory provisions or other arrangements, then the actual ownership will be the determining factor. (f) Common brand name. (g) Promoters of bank (Promoters and Promoter Group as defined in Reserve Bank of India (Commercial Banks – Licensing) Guidelines, 2025). (h) Non-Operative Financial Holding Company (NOFHC) of bank. (i) An entity which has any of the first six relations, as above, with the promoters / NOFHC and their step-down entities.

(iii) Entities Exempted from the Definition of ‘Group Entities’ (a) As the ownership of Public Sector Banks (PSBs) lies with the Government of India, all PSBs could be treated as group entities. However, the Government being a sovereign, its role as promoter and owner of the PSBs would not cause these entities to be treated as group entities. The other relationships as defined in the paragraph 4(5)(ii) may, however, be applicable for identifying entities of each public sector banking group separately. (b) Entities that are promoted by a financial sector intermediary including a bank to undertake financial market infrastructure activities would not be treated as group entities. Such institutions could be depositories, exchanges, clearing and settlement agencies, etc. that are supervised and regulated by the respective financial sector regulators. Exposures of a bank to these entities shall be subject to the extant exposure limits stipulated by the RBI. (c) 6 [The branches in other jurisdictions being part of a parent bank’s operations shall not be covered under the intra-group exposure limits stipulated in paragraph 116. Accordingly, an Indian bank’s exposure to its overseas branches and a foreign bank’s (operating as branches in India) exposure to its Head Office and overseas branches of the Head Office in any jurisdiction shall not be covered under the ITE norms. Exposures of a foreign bank (operating as branches) to its Head Office and other overseas branches of the Head Office would however continue to be subject to compliance with the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025.]

(6) “Large Exposure” or “LE” is the sum of all exposure values of a bank (measured as specified in paragraphs 32 to 85 of Chapter III on Large Exposures Framework) to a counterparty or a group of connected counterparties (as defined in paragraphs 19 to 31), if it is equal to or above 10 percent of the bank’s eligible capital base.