RBI/DOR/2025-26/185
DOR.CRE.REC.104/07-01-002/2025-26
November 28, 2025
Previous Versions
Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025 (Updated as on July 01, 2026)
Table of Contents
Chapter I - Preliminary
A. Short Title and Commencement
B. Applicability
C. Definitions
Chapter II - Role of The Board
Chapter IIA: Credit Facilities Linked to Specific Payment Instruments
Chapter III - Digital Lending Guidelines
A. General Requirements for bank-LSP Arrangements
B. Conduct and Customer Protection Requirements
C. Technology and Data Requirement
D. Reporting of Credit Information and DLAs
E. Loss sharing arrangement in case of default
F. General Provisions
Chapter IV - Lending against Gold and Silver Collateral
A. General Provisions
B. Restrictions and Ceilings
C. Valuation and Assaying of Gold and Silver collateral
D. Loan to Value Ratio (LTV)
E. Other Provisions
Chapter V - [Deleted]
Chapter VA - Gold Metal Loans (GML)
A. Introduction
B. Eligible Banks
C. General Instructions
D. Repayment of GML
E. Disclosures
Chapter VI - Microfinance
A. Definition of Microfinance
B. Assessment of Household Income
C. Limit on Loan Repayment Obligations of a Household
D. Other provisions
Chapter VII - Project Finance
A. Phases of Projects
B. Prudential Conditions Related to Sanction
C. Prudential Conditions Related to Disbursement and Monitoring
D. Other Provisions
Chapter VIII - Credit Facilities to Real Estate Sector
A. Loans and advances to Real Estate Sector
B. Housing Finance
C. Loans and advances to Commercial Real Estate (CRE)
D. Simultaneous classification of CRE into other regulatory categories
E. Loans and Advances to Commercial Real Estate - Residential Housing
Chapter IX - Infrastructure Financing
A. Criteria for Financing
B. Types of Financing by Banks
C. Appraisal
D. Prudential requirements
Chapter X - Discounting / Rediscounting of Bills
Chapter XI - Loans Against Financial Assets
A. *****
B. *****
C. *****
D. *****
E. *****
F. *****
G. *****
H. *****
I. *****
J. *****
K. *****
L. *****
M. Advances against Fixed Deposit Receipts (FDRs)
N. *****
O. Grant of Loans for acquisition of / investing in Small Saving Instruments
P. *****
Q. Loans against Eligible Securities
Chapter XIA – Credit Facilities to Capital Market Intermediaries (CMIs)
A. Scope
B. General Conditions
C. Permissible and Prohibited Credit Facilities
D. Security Coverage
Chapter XII - Finance to Non-Banking Financial Companies (NBFCs)
A. Finance to NBFCs registered with RBI
B. Finance to NBFCs not requiring Registration
C. Activities not eligible for Bank Credit
D. Finance to Factoring Companies
E. Other Prohibitions on Finance to NBFCs
F. Other Instructions
Chapter XIII - Export Credit
A. Rupee Pre-shipment Credit / Packing Credit
B. Rupee Pre-shipment Credit to specific sectors / segments
C. Rupee Post-Shipment Export Credit
D. Deemed Exports - Rupee Export Credit
E. Interest on Rupee Export Credit
F. Pre-shipment Credit in Foreign Currency (PCFC)
G. Post-shipment Credit in Foreign Currency: Rediscounting of Export Bills Abroad Scheme (EBR)
H. Gold Card Scheme for exporters
I. 'On line' credit to exporters
J. Other Provisions
K. Special Measures
Chapter XIV - Non-Fund Based (NFB) Credit Facilities
A. General Conditions
B. Guarantees
C. Usage of electronic-Guarantee
D. Guarantee favouring another RE
E. Co-acceptances
F. Guarantee and related business involving overseas current or capital account transaction
G. Guarantees on behalf of Stock / Commodity Brokers
H. Partial Credit Enhancement – Salient Features
I. Additional conditions for providing PCE to bonds of NBFCs and HFCs
J. Other Aspects of PCE
Chapter XV - Miscellaneous Provisions
A. Bank finance to Government owned entities
B. Loans and advances to Micro, Small & Medium Enterprises (MSMEs)
C. Bridge Loans
Chapter XVI - Repeal and other provisions
A. Repeal and saving
B. Application of other laws not barred
C. Interpretations
Annex - I
Annex - II
Annex - III
Annex - IV
Annex - V
Introduction
Reserve Bank of India (Reserve Bank) is statutorily mandated to operate the credit system of the country to its advantage. In pursuit of this mandate, the Reserve Bank encourages innovation in the financial systems, credit products and delivery mechanisms while ensuring orderly growth, financial stability and the protection of depositors’ and borrowers’ interest. With the progressive deregulation of bank credit, prudential norms primarily serve as regulatory safeguards. These norms, issued from time to time, provide guidance to regulated entities (REs) on the design and delivery of credit-related products and services. These Directions consolidate the instructions issued to commercial banks on credit facilities.
Accordingly, in exercise of powers conferred by Sections 21, and 35A of the Banking Regulation Act, 1949, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues these Directions hereinafter specified.
Chapter I - Preliminary
A. Short Title and Commencement
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These Directions shall be called the Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025.
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These Directions shall come into effect immediately upon its issuance, unless indicated otherwise.
B. Applicability
- These Directions shall be applicable to Small Finance Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').
C. Definitions
(1) For the purpose of these Directions, following definitions shall apply:
- (i) ‘Actual Date of Commencement of Commercial Operations’ (actual DCCO) means the date on which the project is put to commercial use and completion certificate / provisional completion certificate / occupancy certificate (in case of CRE and CRE-RH projects) or its equivalent is issued to the concessionaire / project developer / promoter.
- (ii) ‘Annual Percentage Rate’ (APR) means APR as defined under the Reserve Bank of India (Small Finance Banks - Responsible Business Conduct) Directions, 2025.
- (iii) ‘Appointed Date’ means the date, as defined in the concession agreement entered into between the concessionaire and the concession granting authority, on which the concession agreement comes into force in accordance with the terms outlined therein (applicable only in the case of infrastructure projects under Public Private Partnership (PPP) model).
- (iv) ‘Beneficiary’ means the party in whose favour the NFB facility is issued by the bank.
- (v) ‘Bullet Repayment Loans’ means loans where both principal and interest are due for payment at the maturity of the loan.
- 1[(va) ‘Capital Market Intermediaries (CMIs)’ shall mean regulated entities undertaking trade execution and market infrastructure services in capital markets, including broking, clearing, custody, market making or other incidental services.
Provided that CMIs shall not include Standalone Primary Dealers and Qualified Central Counterparty (QCCPs).
- (vb) ‘Cash and cash equivalents’ shall include cash, balances held in demand and term deposits placed with the lending bank and investments in units of overnight mutual funds (with a minimum haircut of 10 per cent).]
- (vi) ‘Co-acceptance of bills’ means an undertaking to make payment to the drawer of the bill (seller / exporter) on due date if the buyer / importer fails to make the payment on that date.
- (vii) 2[‘Collateral Security’ or ‘Collateral’ means an asset on which a security charge is created in favour of the lender for securing a credit facility].
- (viii) ‘Consumption Loan’ means any permissible loan that does not fit the definition of ‘income generating loan’ as defined subsequently.
- 3[(viiia) ‘Control’ shall have the same meaning as defined in Section 2(27) of the Companies Act, 2013.]
- (ix) ‘Credit Event’ in the context of project finance exposures, shall be deemed to have been triggered on the occurrence of any of the following:
- (a) Default with any lender.
- (b) Any lender(s) determines a need for extension of the original / extended DCCO, as the case may be, of the project.
- (c) Expiry of original / extended DCCO, as the case may be.
- (d) Any lender(s) determines a need for infusion of additional debt.
- (e) The project is faced with financial difficulty as determined under the Reserve Bank of India (Small Finance Banks – Resolution of Stressed Assets) Directions, 2025.
- (x) ‘Date of Financial Closure’: Refers to means the date on which the capital structure of the project, including equity, debt, grant (only in the case of infrastructure PPP projects) (if any), accounting for minimum 90% of total project cost, becomes legally binding on all stakeholders.
Explanation: In the case of CRE-RH projects, lenders may reckon contingent sales receivables (if any) as part of promoters’ contribution to the project.
- (xi) ‘Default’ means non-payment of debt (as defined in Insolvency and Bankruptcy Code (IBC), 2016) when whole or any part or instalment of the debt has become due and payable and is not paid by the debtor.
- (xii) ‘Default Loss Guarantee’ (DLG) means a contractual arrangement, called by whatever name, between the bank and another entity, under which the latter guarantees to compensate the bank, for the loss due to default up to a certain percentage of the loan portfolio of the bank, specified upfront. Any other implicit guarantee of similar nature, linked to the performance of the loan portfolio of the bank and specified upfront, shall also be covered under the definition of DLG.
- (xiii) ‘Digital Lending’ means a remote and automated lending process, largely by use of seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service.
- (xiv) ‘Digital Lending Apps / Platforms (DLAs)’ means a mobile and / or web-based applications, on a standalone basis or as a part of suite of functions of an application with user interface that facilitate digital lending services. DLAs shall include applications of the bank as well as those operated by Lending Service Provider (LSP) engaged by bank for extending any credit facilitation services in conformity with extant outsourcing guidelines issued by the Reserve Bank.
- 4[(xiva) “Eligible Securities” shall include the following securities:
- (a) Listed Group-1 equity shares and preference shares;
Explanation: Group 1 securities as defined under instructions issued by Securities and Exchange Board of India (SEBI)
- (b) Government Securities, including Treasury Bills and Sovereign Gold Bonds;
- (c) Listed Debt Securities, including Convertible Debt Securities, rated BBB or higher;
Explanation: Debt securities as defined under Section 2(1)(k) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 dated August 9, 2021, as updated from time to time.
- (d) Units of Mutual Fund Schemes which are listed or where repurchase/redemption facility is available for such units through the Asset Management Company, with underlying investments in equity, equity related instruments or debt instruments.
- (e) Units of Exchange Traded Funds (excluding gold, silver and any other commodity ETFs)
- (f) Units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs);]
- (xv) ‘Extended DCCO’: If the original DCCO is revised, then the revised DCCO shall be termed as the Extended DCCO.
- 5[(xva) ’Gold Metal Loans’ (GML) mean loans extended by eligible banks to specified borrowers in the form of gold metal.
- (a) ’GMS-linked GML’ means GML extended by designated banks under the Gold Monetization Scheme, 2015 (GMS), utilising – (i) the gold deposit accepted by them as Short Term Bank Deposit under the GMS, or (ii) gold borrowed from other designated banks under GMS, and where the repayment can be either in gold or in cash or in a combination of both.
- (b) ’Import-linked GML’ means GML extended by nominated banks authorized to import gold, where the source of gold metal lent is gold imported by them, and where repayment has to be necessarily in cash.]
- (xvi) ‘Guarantee’ means a contract to perform the promise, or discharge the liability, of a third person in the contingent case of his non-performance or default, in terms of The Indian Contract Act, 1872.
- (xvii) ‘Guarantor’ means the party which issues the guarantee.
- (xviii) ‘Infrastructure Sector’ shall include the sub-sectors included in the Harmonised Master List of Infrastructure sub-sectors issued by the Department of Economic Affairs, Ministry of Finance, Government of India.
- (xix) ‘Income Generating Loan’ means loans extended for the purpose of productive economic activities, such as farm credit, loans for business or commercial purposes, loans for creation or acquisition of productive assets etc.
- (xx) ‘Interest During Construction’ (IDC) means the interest accrued on debt provided by a lender and capitalised during the construction phase of the project.
- (xxi) ‘Jewellery’ means items that are designed to be worn as personal adornments.
- (xxii) ‘Lending Service Provider’ (LSP) means an agent of the bank (including another bank) who carries out one or more of bank’s digital lending functions, or part thereof, in customer acquisition, services incidental to underwriting and pricing, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of the bank in conformity with extant outsourcing guidelines issued by the Reserve Bank.
Provided that, while entities offering only Payment Aggregator (PA) services in terms of the extant instructions issued by the Reserve Bank shall remain out of the ambit of these Directions, any PA also performing the role of an LSP shall comply with Chapter III of these Directions.
- 6[(xxiia) ‘Loan to Value (LTV)’ shall mean the ratio of the outstanding loan amount to the value of the securities as on any given day.
- (xxiib) ‘Margin’ shall mean the contribution of the borrower, either in the form of cash or other liquid assets, for the purpose of purchasing or borrowing a security with bank finance or obtaining a non-fund-based facility from bank.
- (xxiic) ‘Non-financial company’ shall mean an entity not primarily engaged in undertaking financial activities, and in the context of domestic entities, shall refer to a non-banking institution which is a company but not included in the definition of a ‘financial institution’ or a ‘non-banking financial company’ as per the RBI Act, 1934.]
- (xxiii) ‘Normal transit period’ means the average period normally involved from the date of negotiation / purchase / discount till the receipt of bill proceeds in the Nostro account of the bank concerned, as prescribed by FEDAI from time to time.
Explanation: It is clarified that it is not the time taken for the arrival of goods at overseas destination.
- (xxiv) ‘Obligor’ in the context of Chapter XIV of these Directions means a party against whose obligations, financial or otherwise, a NFB facility has been issued. In the case of guarantees, the obligor may also be termed as ‘principal debtor’, as defined under the Indian Contract Act, 1872.
- (xxv) ‘Original DCCO’ means the date, as envisaged at the time of financial closure, by which the project is expected to be put to commercial use and completion certificate / provisional completion certificate, or its equivalent, is expected to be issued to the concessionaire / project developer / promoter.
Provided that, in the case of CRE and CRE-RH projects, original DCCO shall be the date on which Occupancy Certificate, or its equivalent, is expected to be obtained from the competent authority.
- (xxvi) ‘Ornaments’ means items meant for use as adornment of any object, decorative items, or utensils, excluding those items that fall under the definition of jewellery as defined previously.
- (xxvii) ‘Overdue bill’ in the case of a demand bill means a bill which is not paid before the expiry of the normal transit period, plus grace period. In the case of a usance bill, it refers to a bill which is not paid on the due date.
- (xxviii) ‘Post-shipment Credit’ means any loan or advance granted or any other credit provided by the bank to an exporter of goods / services from India from the date of extending credit after shipment of goods / rendering of services to the date of realisation of export proceeds, and includes any loan or advance granted to an exporter, in consideration of, or on the security of any duty drawback allowed by the Government from time to time.
- (xxix) ‘Pre-shipment’ / ‘Packing Credit’ means any loan or advance granted or any other credit provided by the bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses towards rendering of services on the basis of letter of credit opened in his favour or in favour of some other person, by an overseas buyer or a confirmed and irrevocable order for the export of goods / services from India or any other evidence of an order for export from India having been placed on the exporter or some other person, unless lodgement of export orders or letter of credit with the bank has been waived.
- (xxx) ‘Primary Gold’ and ‘Primary Silver’ means gold and silver in any form other than in the form of a jewellery, ornaments and coins.
- 7[(xxxa) ‘Primary Security’ shall mean security created on assets which have been financed out of the credit facility extended to the borrower.]
- (xxxi) ‘Project’ in the context of Chapter VII of these Directions means a venture undertaken through capital expenditure (involving current and future outlay of funds) for creation / expansion / upgradation of tangible assets and / or facilities in the expectation of stream of cash flow benefits extending far into the future. Projects usually have the characteristics of a long gestation period, irreversibility and substantial capital outlays.
- (xxxii) ‘Project Finance’ in the context of Chapter VII of these Directions refers to the method of funding a project in which the revenues to be generated by the funded project serve as the primary security for the loan, and also as a source of repayment. Project finance may take the form of financing the construction of a new capital installation (greenfield), or financing an improvement / enhancement in the existing installation (brownfield). For the purpose of these Directions, an exposure shall qualify as a project finance exposure only if the following conditions are satisfied:
- (a) The pre-dominant source of repayment as envisaged at the time of financial closure (i.e., at least 51 per cent) must be from cash flows arising from the project which is being financed.
- (b) All the lenders have a common agreement with the debtor.
Explanation: A common agreement may have different loan terms (except original / extended / actual DCCO as specified in paragraph 76 of these Directions) for each of the lender provided the same has been agreed upon by the debtor and all the lender(s) to the project.
- (xxxiii) ‘Restructuring’ shall have the same meaning as specified under the Reserve Bank of India (Small Finance Banks - Resolution of Stressed Assets), Directions, 2025.
- (xxxiv) ‘Resolution Plan’ (RP) shall have the same meaning as specified under the Reserve Bank of India (Small Finance Banks – Resolution of Stressed Assets) Directions, 2025.
- (xxxv) ‘Secured portion of an NFB facility’ means the portion of the facility covered by realisable value of tangible security/ collateral estimated on a realistic basis.
- (xxxvi) ‘Top-up Loan’ in the context of Chapter IV of these Directions means an additional loan sanctioned over and above an outstanding loan, during the tenor of the original loan, based on the strength of the collateral already pledged for the existing loan.
