RBI master-direction RBI/DOR/2025-26/256 · 28 Nov 2025
Official title
Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025 (updated as on July 01, 2026)
Summary
Check the official recordThe Reserve Bank of India issues these Directions to regulate credit risk management in Regional Rural Banks. The framework mandates Board-approved policies for credit risk, property valuation, and transaction account maintenance. Banks must adhere to statutory restrictions on lending against own shares and to directors. The Directions establish materiality thresholds for related party loans and require recusal of interested parties from decision-making. Banks must monitor current and overdraft accounts based on banking system exposure and maintain a minimum loan component for large working capital borrowers. Banks must file security interests with CERSAI and monitor accounts for prohibited third-party transactions. These Directions replace previous guidelines and take effect immediately.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/256
DOR.CRE.REC.175/07-02-004/2025-26
November 28, 2025
Previous Versions
Reserve Bank of India (Regional Rural Banks – 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 - Statutory Restrictions
Chapter IIIA - Regulatory Restrictions
Chapter IV - Valuation of Properties - Empanelment of Valuers
Chapter V - Filing of Security Interest relating to Immovable (other than equitable mortgage), Movable, and Intangible Assets in CERSAI
Chapter VI - [Deleted]
Chapter VIA - Maintenance of Cash Credit Accounts, Current Accounts and Overdraft Accounts by Banks
Chapter VII - Loan System for Delivery of Bank Credit
Chapter VIII – Miscellaneous
Chapter IX - Repeal and other provisions
Annex I
Annex II
Introduction
Regional Rural Banks (RRBs), 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 RRBs 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 RRBs 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 Sections 20, 21 and 35A of the Banking Regulation Act, 1949, 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 the Directions hereinafter specified.
Chapter I - Preliminary
A. Short title and Commencement
These Directions shall be called the Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025.
These Directions shall come into effect immediately upon issuance.
B. Applicability
C. Definitions
(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.
(iii) 'Cash credit (CC)' shall mean a facility, under which a customer is allowed an advance up to the credit limit against the security by way of hypothecation / pledge of goods, book debts, standing crops, etc. The facility is a running account and 'Drawing Power - DP' is periodically determined with reference to the value of the eligible current assets. The outstanding amount is repayable on demand.
^1[(iiia) ‘Committee on lending to related parties’ shall mean a committee of the Board of the bank entrusted with sanctioning of loans to related parties. Banks may also identify any existing Committee, other than the Audit Committee, for this purpose.
(iiib) ‘Contract or arrangement’ shall have the same meaning as specified in Section 188(1)(a) to (g) of the Companies Act, 2013.
(iiic) ‘Control’ shall have the same meaning as assigned to it under Section 2(27) of the Companies Act, 2013.]
(iv) ‘Current Account’ shall mean a form of demand deposit account wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts which are neither Savings nor Term deposit account.
(v) ‘Demand loans’ shall mean all loans repayable on demand (such as cash credit, overdraft, bills purchased and discounted, etc.) and short-term loans with maturity up to one year, whether secured or unsecured, are considered demand loans.
^2[(va) Director of a bank’ shall have the same meaning as defined in Explanation (b) to Section 20 of the Banking Regulation Act 1949 and would include a nominee director and an independent director.
(vb) ‘Entity’ in the context of a ‘related party’ prescribed in Chapter IIIA of these Directions shall mean a ‘person’ other than an individual and a Hindu Undivided Family (HUF).
(vc) ‘Key Managerial Personnel (KMP)’ of a bank shall have the same meaning as defined in Section 2(51) of the Companies Act, 2013.
(vd) ‘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.]
(vi) ‘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.
(vii) ‘Overdraft (OD)’ shall mean a facility, under which a customer is allowed to draw an agreed sum (credit limit) in excess of credit balance in their account. The overdraft facility may be secured (against fixed / term deposits and other securities, like small saving instruments, surrender value of insurance policies, etc.) or clean (i.e. without any security). The overdraft facility might be granted on their current account, savings deposits account or temporary overdraft on credit accounts.
^3[(viia) ‘Person’ shall have the same meaning as assigned to it under Section 3 (23) of Part I of Insolvency and Bankruptcy Code (IBC), 2016.
(viib) ‘Personal loan’ shall have the same meaning as defined under Banking Statistics (Harmonised Definitions).
(viic) ‘Promoter’ shall have the same meaning as assigned to it under Section 2(69) of the Companies Act, 2013.
(viid) ‘Reciprocally Related Person’ means an individual who is either (a) 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 (b) a trustee of a mutual fund or an alternate investment fund established by any of the aforesaid regulated entities; or (c) a relative of such a director or a trustee.
(viie) ‘Related Party’ with respect to a bank shall mean a related person, a reciprocally related person, or any of the following entities:
