Reserve Bank of India (Local Area Banks – Miscellaneous) Directions, 2025

RBI/DOR/2025-26/246 DOR.SOG(SPE).REC.No.165/13-04-001/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Local Area Banks – Miscellaneous) Directions, 2025 (Updated as on April 27, 2026)

Table of Contents

• Chapter I – Preliminary
  • A. Short Title and Commencement
  • B. Applicability
  • C. Definitions
• Chapter II – Role of the Board
  • A. Board Approved Policies
  • B. Reviews by the Board
• Chapter III – Depositor Education and Awareness Fund
  • A. Definitions
  • B. Credits to the Fund
  • C. Refunds and Interest
  • D. Registration Guidelines
  • E. Procedural Guidelines for Transfer and Claim
  • F. Returns
  • G. Disclosure in Notes to Accounts
  • H. Audit
  • I. Preservation of Records
  • J. Furnishing of Information
  • K. Contact Details
  • L. Interpretation of the Provisions of the Scheme
• Chapter IV – Investment in Alternative Investment Funds (AIFs)
  • A. Definitions
  • B. General Requirement
  • C. Limits on Investments and Provisioning
  • D. Exemptions
  • E. Transitional Arrangements
• Chapter V – Services and Market Operations
  • A. Camps and Campaigns for Periodic Updation of KYC
• Chapter VI – Regulatory Compliance and Legal Matters
  • A. Implementation of Instructions issued by RBI
  • B. Legal Compliance
  • C. Court Directives
  • D. Inter-Governmental Agreement (IGA) with United States of America (US) under Foreign Accounts Tax Compliance Act (FATCA) - Registration Requirements
• Chapter VII – Financial Conduct and Prohibited Activities
  • A. Donations or Contributions for Public / Charitable Purposes
  • B. Prohibition on Acceptance of Deposits at the Instance of Private Financiers / Unincorporated Bodies
  • C. Prohibition on Association with Prize Chit Schemes and Sale of Lottery Tickets
• Chapter VIII – Taxation and Accounting Related Matters
  • A. Demand for Information by Income Tax Authorities
• Chapter IX – Human Resource and Capacity Building
  • A. Certifications
• Chapter X – Operational and Administrative Matters
  • A. Mandatory Leaves
  • B. Statement of Immovable Property
• Chapter XI – Repeal Provisions
  • A. Repeal and Saving
  • B. Application of Other Laws not Barred
  • C. Interpretations
• Annex I
• Annex II
• Annex III
• Annex IV
• Annex V
• Annex VI
• Annex VII
• Annex VIII
• Annex IX
• Annex X
• Annex XI

In exercise of the powers conferred by Section 26A and Section 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 (Local Area Banks – Miscellaneous) Directions, 2025.
2. [1] These Directions shall come into force with immediate effect.

B. Applicability

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

C. Definitions

4. In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below: (1) 'Act' means the Banking Regulation Act, 1949 (10 of 1949); and (2) ‘DICGC' means the Deposit Insurance and Credit Guarantee Corporation established under Section 3 of the Deposit Insurance Corporation Act, 1961
5. Additional definitions have been provided in the respective chapters as per the applicability.
6. All other expressions, unless defined in the corresponding chapter, 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 any statutory modification or re-enactment thereto, or Glossary of Terms published by the RBI, or as used in commercial parlance, as the case may be.

Chapter II – Role of the Board

A. Board Approved Policies

7. A bank shall have separate Board-approved policies relating to the following areas, if applicable: (1) investment in AIFs, as specified in paragraph 33 of these Directions; (2) making of donations, in line with instructions contained in paragraph 48 of these Directions; (3) courses / certifications required for specialised areas of operations as laid out in paragraph 57 and paragraph 58 of these Directions; and (4) list of sensitive positions to be covered under mandatory leave requirements in terms of paragraph 59 of these Directions.

B. Reviews by the Board

8. The Board shall review and update policies in respect of ‘mandatory leave' as set out in paragraph 59 of these Directions.

Chapter III – Depositor Education and Awareness Fund

A. Definitions

9. In this chapter, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below: (1) ‘Committee’ means the Committee constituted under the Fund; (2) 'Fund' means the Depositor Education and Awareness Fund established by RBI under the Scheme notified vide Gazette Notification dated May 24, 2014, hereinafter referred to as the Scheme; (3) 'Liquidator' means liquidator of a bank appointed under any law for the time being in force; (4) 'Principal amount' means the amount, including interest, transferred by a bank to the Fund in terms of Section 26A of the Act; and (5) 'Amount due' means any credit balances in any account or any deposit in a bank remaining unclaimed or inoperative for ten years or more;

B. Credits to the Fund

10. A bank shall credit to the Fund the credit balance in any of the deposit account maintained with the bank which have not been operated upon for ten years or more, or any amount remaining unclaimed for ten years or more, as applicable to the banking entity

Explanation: A bank shall deposit the amounts to be credited to the Fund in the specified account maintained with RBI. The procedure for transfer is specified in paragraph 19 of these Directions.

11. A bank shall transfer to the Fund the entire amount as specified in the above paragraph, including the accrued interest that the bank would have been required to pay to the customer / depositor as on the date of transfer to the Fund.
12. Any expenditure incurred for the promotion of depositors’ education, awareness, interests and other purposes that may be specified by RBI under Section 26A (4) of the Act, shall be charged to the Fund.

C. Refunds and Interest

13. In case of demand from a customer / depositor (or legal heirs in case of deceased depositors) whose unclaimed amount / deposit had been transferred to the Fund, a bank shall repay the customer / depositor, along with interest if applicable, and lodge a claim for refund from the Fund for an equivalent amount paid to the customer / depositor.

Explanation: While there is no specific time limit prescribed in the Scheme for claiming a refund from the Fund by a customer / depositor, customers, depositors or legal heirs [in case of deceased depositor(s)] are encouraged to claim such amounts as soon as they become aware of unclaimed amounts.

14. The interest payable, if any, from the Fund on a claim shall accrue only from the date on which the balance in an account was transferred to the Fund to the date of payment to the customer / depositor. No interest shall be payable in respect of amounts refunded from the Fund, in respect of which no interest was payable by the bank to its customer / depositor.
15. A bank shall calculate the interest payable (by a bank to its depositors / claimants) on principal amount of unclaimed interest bearing deposits transferred to the Fund at the rate of 4 percent per annum up to June 30, 2018, 3.5 percent w.e.f. July 1, 2018 up to May 10, 2021 and at 3 percent with effect from May 11, 2021 till the time of payment to the depositor / claimant. Changes to the rate of interest, if any, payable on the principal amount transferred to the Fund shall be specified by RBI from time to time.