Reserve Bank of India (Commercial Banks – Miscellaneous) Supervisory Directions, 2026

RBI/DoS/2026-27/416 DoS.CO.PPG.10/11.01.005/2026-27 July 31, 2026

Reserve Bank of India (Commercial Banks – Miscellaneous) Supervisory Directions, 2026

Table of Contents

Chapter I - Preliminary A. Short Title and Commencement B. Applicability C. Definitions Chapter II - Access to IT Systems Chapter III - Monitoring of End Use of Funds Chapter IV - Prompt Corrective Action Framework Chapter V - Fair Practices Code - Charging of Interest Chapter VI - Inoperative Accounts / Unclaimed Deposits Chapter VII - Nomination Facility Chapter VIII – Fraud Prevention Measures A. Frauds due to Collusion of the bank Officials B. Large Value Frauds C. Retail Loans - Sanction of Bulk Proposals D. Frauds by Deposit of Fake Title Deeds of Property E. Frauds in Non-resident Accounts F. Safe custody of Critical Documents G. Accounts opened by Employees H. Legal Compliance Certificate I. Legal Compliance Audit J. Forensic Scrutiny K. Exercise of Discretionary Power L. Best Practices Code in banks M. Other Instructions Chapter IX - Protected Disclosure Scheme A. Scope and Coverage B. Procedure for Lodging the Complaint under the Scheme C. Protected Disclosure Policy Chapter X – Vigilance A. Preamble B. Introduction C. Vigilance Angle D. Chief of Internal Vigilance D.1 Appointment D.2 Tenure D.3 Association with Sensitive Matters D.4 Submission of Reports and Returns - Review E. Preventive Vigilance F. Staff Rotation and Mandatory Leave G. Complaints H. Investigation Agency for Conducting Investigations I. Review of Cases entrusted to Investigating Agencies J. Action against Persons making False Complaints K. Liaison with Agencies Chapter XI - Vigilance Monitoring Return Chapter XII - Repeal and Other Provisions A. Repeal and Saving B. Application of Other Laws Not Barred C. Interpretations

In exercise of the powers conferred by Section 35-A 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 Directions hereinafter specified.

Chapter I - Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Commercial Banks - Miscellaneous) Supervisory Directions, 2026.

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 'bank').

For the purpose of these Directions, ‘Commercial Banks’ means banking companies (other than Small Finance Banks, Payments 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.

Provided that provisions of Chapter IX and Chapter X of these Directions shall be applicable only to Private Sector Banks and Foreign Banks, while the provisions of Chapter XI of these Directions shall be applicable only to Public Sector Banks.

C. Definitions

4. All expressions herein shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1934, or the Banking Regulation Act, 1949, or the Companies Act, 2013, or any statutory modification or re-enactment thereto, or other regulations issued by the RBI or the Glossary of Terms published by the RBI, or as used in commercial parlance, as the case may be.

Chapter II - Access to IT Systems

5. The bank shall provide the highest level of 'read only' access to its Information Technology systems and manpower assistance, if required, to RBI’s officers.

Chapter III - Monitoring of End Use of Funds

6. The bank shall evaluate the efficacy of its machinery for post-sanction monitoring and follow-up of advances and make it robust, wherever considered necessary, for preventing diversion of funds through practices such as crediting of term loan disbursements to the current / cash credit accounts of borrowers and utilisation thereof for day-to-day operations, and exclusive reliance on Chartered Accountants’ certification both in regard to infusion of promoters' contribution and deployment of bank’s funds. For this purpose, the systems and procedures of the bank may broadly include the following within the overall regulatory guidelines:

• (1) meaningful scrutiny of the periodical progress reports and operating / financial statements of the borrowers;
• (2) regular visits to the assisted units and inspection of securities charged / hypothecated to the bank;
• (3) periodical scrutiny of the books of accounts of the borrowers;
• (4) stock audits depending upon the extent of exposure;
• (5) obtention of certificates from the borrowers that the funds have been utilised for the purposes approved and in case of incorrect certification, initiation of prompt action as may be warranted, which may include withdrawal of the facilities sanctioned and legal recourse as well. In case a specific certification regarding diversion / siphoning of funds is desired from the auditors of the borrowers, a separate mandate may be awarded to them and appropriate covenants shall be incorporated in the loan agreements; and
• (6) examination of all aspects of diversion of funds during internal audit / inspection of the branches and at the time of periodical reviews.

Chapter IV - Prompt Corrective Action Framework

7. The objective of the Prompt Corrective Action (PCA) Framework is to enable supervisory intervention at appropriate time and require the bank to initiate and implement remedial measures in a timely manner, so as to restore its financial health. The PCA Framework is also intended to act as a tool for effective market discipline. The PCA Framework does not preclude RBI from taking any other action as it deems fit at any time, in addition to the corrective actions prescribed in the Framework.

8. Capital, Asset Quality and Leverage will be the key areas for monitoring in the Framework. Indicators to be tracked for Capital, Asset Quality and Leverage shall be Capital to Risk-weighted Assets Ratio (CRAR) / Common Equity Tier 1 (CET 1) Ratio {the percentage of common equity capital, net of regulatory adjustments, to total risk weighted assets as prescribed in Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025 }, Net Non-Performing Asset (NPA) Ratio (the percentage of net NPAs to net advances) and Tier I Leverage Ratio {the percentage of the capital measure to the exposure measure as prescribed in Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025 } respectively. Breach of any of the following risk threshold may result in invocation of PCA:

PCA Matrix – Parameters, Indicators and Risk Thresholds

Upto 162.50 bps below the Indicator prescribed at column (2) | More than 250 bps but not exceeding 400 bps below the Indicator prescribed at column (2)

More than 162.50 bps below but not exceeding 312.50 bps below the Indicator prescribed at column (2) | In excess of 400 bps below the Indicator prescribed at column (2)

In excess of 312.50 bps below the Indicator prescribed at column (2) | | Asset Quality | Net Non-Performing Advances (NNPA) ratio | >=6.0 per cent but <9.0 per cent | >=9.0 per cent but < 12.0 per cent | >=12.0 per cent | | Leverage | Regulatory minimum Tier 1 Leverage Ratio | Upto 50 bps below the regulatory minimum | More than 50 bps but not exceeding 100 bps below the regulatory minimum | More than 100 bps below the regulatory minimum |