Reserve Bank of India (Payments Banks – Undertaking of Financial Services) Directions, 2025 · RBI/DOR/2025-26/208

RBI/DOR/2025-26/208
DOR.AUT.REC.No.127/24-01-041/2025-26

November 28, 2025

Previous Versions

Reserve Bank of India (Payments Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on December 05, 2025)

Table of Contents

Chapter I – Preliminary
A. Short Title and Commencement
B. Applicability
C. Definitions
Chapter II – Role of the Board
Chapter III – General Guidelines
A. Forms of Business
B. Procedure for Application
Chapter IV – Financial Services
A. Agency Business
B. Referral Services
Chapter V – 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 the Directions hereinafter specified.

Chapter I – Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Payments Banks – Undertaking of Financial Services) Directions, 2025.

2. These Directions shall come into force with immediate effect.

B. Applicability

3. These Directions shall be applicable to Payments 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) ^1‘Agency Business’ means an arrangement under which a bank acts as an agent of a third-party product or service provider (TPPSP), without risk participation, to facilitate the sale of the latter’s financial products or services (e.g., insurance, mutual fund, pension fund, etc.) to its own customers. Under agency business arrangement, the bank shall enter into an agreement with a TPPSP for sale of only regulated financial products or services. The activities covered under agency business arrangements may inter-alia include marketing, sales, promotion, initial point of contact for redressal of grievance and other after-sale services related to the product or service.

(1A) ‘Financial Services Company’ means a company engaged in the ‘business of financial services’.

Explanation: The ‘business of financial services’ shall include –

• the forms of business enumerated in clauses (a), (c), (d), (e) of sub- Section (1) of Section 6 of the Banking Regulation Act, 1949 and notified under clause (o) of sub-Section (1) of Section 6 of the Banking Regulation Act, 1949;
• the forms of business enumerated in clause (c) and clause (f) of Section 45 I of Reserve Bank of India Act, 1934;
• business of credit information as provided under the Credit Information Companies (Regulation) Act, 2005;
• operation of a payment system as defined under the Payment and Settlement Systems Act, 2007;
• operation of a stock exchange, commodity exchange, derivatives exchange or other exchange of similar nature;
• operation of a depository as provided under the Depositories Act, 1996;
• business of an Asset Reconstruction Company as provided under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
• business of a merchant banker, portfolio manager, stock broker, sub- broker, share transfer agent, trustee of trust deeds, registrar to an issue, merchant banker, underwriter, debenture trustee, investment adviser and such other intermediary as provided in the Securities and Exchange Board of India Act, 1992 and the regulations made thereunder;
• business of a credit rating agency as defined in the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999;
• business of a collective investment scheme as defined under the Securities and Exchange Board of India Act, 1992;
• business of managing a pension fund;
• business of an authorised person as defined under the Foreign Exchange Management Act, 1999; and
• such other business as may be specified by RBI from time to time.

(2) ‘Mutual Fund’ shall have the same meaning as defined in SEBI (Mutual Funds) Regulations, 1996.

(3) ^2‘Referral Services’ means an arrangement under which a bank may refer its customers to a TPPSP by making available information about the financial products or services offered by the TPPSP.

Note: Under referral arrangement, the bank shall neither be involved in any of the processes relating to the third-party products or services (TPPS) nor the name or brand of the bank shall feature in any of the product/service documents. No processes relating to TPPS shall either be integrated with the bank’s platform/carried out within the premises of the bank (unless specifically permitted) or be accessible in the form of a micro-site or micro-application, except for an access link to redirect the customer to the TPPSP.

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

Chapter II – Role of the Board

6. The Board of a bank shall be responsible for approval of policies, and risk governance in respect of various activities undertaken by the bank.

7. A bank shall put in place Board-approved policies for,

• insurance distribution to, inter alia, ensure customer suitability, appropriateness, and a clear grievance redressal framework and compensation policy to address service-related issues effectively and
• governing the corporate agency business of insurance companies undertaken departmentally by the bank. The policy shall, at a minimum, cover the model of insurance distribution to be adopted, customer suitability and appropriateness, and the framework for grievance redressal.

8. In respect of insurance distribution business, the Board shall ensure that a robust internal grievance redressal mechanism is in place.

Chapter III – General Guidelines

A. Forms of Business

9. Unless specified otherwise in these Directions, a bank desirous of undertaking the businesses permitted under Section 6(1) of the Banking Regulation Act, 1949 and under the specific licensing conditions, may do so only departmentally.

10. Payment Banks cannot set up subsidiaries to undertake any non-banking financial services activity. Further, an activity undertaken departmentally shall be subject to the following conditions:

• There shall be a policy which shall comprehensively cover the said business including identification of various risks associated with it and an appropriate risk mitigation framework, including adherence to capital allocation norms;
• The instructions / guidelines on KYC / AML / CFT applicable to banks, issued by RBI from time to time, shall be complied with;
• The general principles as enunciated in the Charter of Customer Rights issued by RBI shall be adhered to;
• The specific conditions prescribed for the respective businesses in Chapter IV shall be complied with in addition to the instructions / regulations of respective regulators such as SEBI, IRDAI and PFRDA, as applicable; and
• A bank shall obtain prior approval of RBI before engaging in a financial activity other than those stated in Chapter IV.

In addition to the above, conduct of business by Payments Banks shall also be subject to their respective licensing guidelines/conditions.

B. Procedure for Application

11. A bank desirous of undertaking any business that requires prior approval / no-objection of RBI shall submit an application through Pravaah Portal (https://pravaah.rbi.org.in) to the Department of Regulation (DoR), Central Office, RBI.

Chapter IV – Financial Services

A. Agency Business

12. Agency business shall be undertaken only for the products and services in which a bank is permitted to deal in as per Banking Regulation Act, 1949.

13. The service shall be provided on fee basis, without any risk participation.

14. Agency business of mutual fund companies undertaken departmentally shall be subject to the following additional conditions:

• A bank shall undertake distribution of mutual fund units on a non-risk sharing basis and not requiring commitment of their own funds with the prior approval of RBI and after complying with the requirements of the sectoral regulator for such products.
• The investors’ applications for purchase / sale of mutual fund units shall be forwarded to the mutual funds / registrars / transfer agents;
• The purchase of units shall be at the customers’ risk without the bank guaranteeing any assured return;
• Mutual fund units shall not be acquired from the secondary market or bought back from a customer for selling it to other customers;
• A bank holding custody of mutual fund units on behalf of its customers shall keep the investments of the customers distinct from its own investments.

15. Corporate agency of insurance companies undertaken departmentally by banks shall be subject to the following additional conditions:

• A bank shall undertake distribution of Insurance units on a non-risk sharing basis and not requiring commitment of their own funds with the prior approval of RBI and after complying with the requirements of the sectoral regulator for such products.
• There shall be a Board approved policy encompassing the model of insurance distribution to be adopted, issues of customer appropriateness, suitability, and grievance redressal;
• The deposit to be maintained by an insurance broker as per the IRDAI (Licensing of Banks as Insurance Brokers) Regulations, 2013, as amended from time to time, shall be maintained with a scheduled commercial bank other than itself;
• (4) A bank shall ensure customer appropriateness and suitability as under:
  • All employees dealing with insurance agency / broking business shall possess the requisite qualification prescribed by IRDAI;
  • There shall be standardised system of assessing the need/ suitability of products for a customer and the initiation / transaction processes shall be segregated. Products with investment components shall require the bank to necessarily undertake a customer need assessment prior to sale whereas pure risk term products with no investment or growth component shall be deemed as universally suitable products; and
  • A bank shall treat its customers fairly, honestly and transparently, with regard to suitability and appropriateness of the insurance product sold.
• (5) It shall be ensured that performance assessment and incentive structure for staff is not violative of Section 10(1) (ii) of the BR Act, 1949 or the guidelines issued by IRDAI in payment of commissions / brokerage / incentives. It shall also be ensured that no incentive (cash or non-cash) is paid to the staff engaged in insurance broking / corporate agency services by the insurance company;
• (6) A bank shall not follow any restrictive practices of forcing a customer to either opt for products of a specific insurance company or link sale of such products to any banking product. It shall be prominently stated in all publicity material distributed by the bank that the purchase by a bank’s customer of any insurance product is purely voluntary and is not linked to availment of any other facility from the bank; and
• (7) A robust internal grievance redressal mechanism shall be put in place along with a Board approved customer compensation policy for resolving issues related to services offered. It shall be ensured that the insurance companies whose products are being sold have robust customer grievance redressal arrangements in place. The bank shall facilitate the redressal of grievances.