We at Finakon track the regulatory changes. We also use AI to create a summary. We are providing a quick overview of the RBI circulars on a weekly basis on our website. The summary is neither exhaustive nor comprehensive. For accurate information, users shall refer to the original circular of the regulator. Finakon shall not be responsible for inferences drawn based on the summary provided.
Update to Banks’ Grievance Redress Framework
The Reserve Bank of India (RBI) has reviewed its instructions on bank grievance redress mechanisms and withdrawn the circular dated January 27, 2021, to streamline regulations and avoid duplication.
Complaint disclosures are now covered under the Master Direction on Financial Statements: Presentation and Disclosures (2025). The compensation framework has been strengthened through the Reserve Bank–Integrated Ombudsman Scheme, 2026, and the Internal Ombudsman Directions, 2026, which enable compensation recommendations. Grievance systems will continue to be assessed through regular supervisory processes.
Banks remain responsible for maintaining effective customer grievance redress mechanisms in line with existing regulations and Board-approved policies. The 2021 circular stands repealed with immediate effect.
RBI Updates Income Recognition Norms for Rural Co-operative Banks
The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Rural Co-operative Banks – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026, revising the 2025 framework to standardise income recognition and align practices with other regulated entities.
Key Changes
- Standard advances: Income (interest, fees, commission, etc.) may be recognised on an accrual basis, without any matching provision.
- Non-Standard advances: Income to be recognised on cash/actual receipt basis only, including Government-guaranteed exposures.
- NPA accounts: All unrealised accrued income must be reversed upon NPA classification.
- Relevant paragraphs have been updated to incorporate these provisions.
Effective Date
These amendments are effective immediately.
RBI Aligns NBFC Credit Facility Norms with Updated IRACP Framework
The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Amendment Directions, 2026, introducing revisions to the existing 2025 Directions to align asset classification and provisioning requirements with the updated Income Recognition, Asset Classification and Provisioning (IRACP) framework.
Key Update
- Asset classification of individual loan assets and the related provisioning requirements shall be governed by the Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025, as amended.
Impact on NBFCs
- Credit facility classification and provisioning must follow the revised IRACP norms.
- Ensures consistency between credit facility regulations and income recognition standards.
Effective Date
The amendment is effective immediately.
RBI Updates Provisioning Norms for NBFC Portfolios Covered by Default Loss Guarantees (DLG)
The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026, introducing specific provisioning and disclosure requirements for loan portfolios covered under Default Loss Guarantee (DLG) arrangements.
The amendments aim to ensure consistent application of prudential and accounting principles for NBFCs engaged in digital lending and co-lending structures where DLGs are permitted.
Key Provisions
- Provisioning under ECL framework:
NBFCs may consider the impact of DLG coverage while determining provisions under the Expected Credit Loss (ECL) framework across all stages, subject to compliance with Indian Accounting Standards (IndAS). The DLG must form an integral part of the loan’s contractual terms and should not be recognised separately. - Disclosure requirements:
NBFCs must comply with disclosure norms as prescribed under IndAS 1. - Recomputation of provisions:
Upon invocation of a DLG, the available cover reduces accordingly. NBFCs are required to recompute ECL provisioning after adjusting for the reduced guarantee cover.
Related Update
Consequential amendments have also been issued under the NBFC – Credit Facilities Amendment Directions, 2026.
Effective Date
The amendments are effective immediately.
RBI Updates Credit Facility Norms for Commercial Banks
The Reserve Bank of India (RBI) has issued the Commercial Banks – Credit Facilities Amendment Directions, 2026, standardising rules for acquisition finance, bridge finance, loans against securities, and lending to capital market intermediaries.
Key changes at a glance
- Clear definitions for lending categories and risk terms
- Acquisition finance allowed with Board-approved policies, leverage limits, security cover, and a 75% funding cap
- Bridge finance permitted as short-term interim funding (up to 1 year)
- Loans against securities subject to LTV limits, margins, valuation norms, and end-use monitoring
- Capital market intermediaries eligible for need-based facilities with collateral and exposure controls; speculative use restricted
Effective date
Applicable from April 1, 2026, with earlier adoption permitted. Existing facilities may run to maturity; new or renewed loans must comply.
RBI Revises Concentration Risk and Capital Market Exposure Norms for Banks
The Reserve Bank of India (RBI) has issued the Commercial Banks – Concentration Risk Management Amendment Directions, 2026, updating the 2025 framework to standardise definitions, expand the scope of capital market exposures (CME), and prescribe revised prudential limits and calculation methods.
Key updates
- Aligns definitions for acquisition finance, bridge finance, collateral, and capital market intermediaries
- Broadens CME to include both direct and indirect exposures such as equity investments, loans against securities, acquisition/bridge finance, underwriting commitments, and lending to CMIs
- Sets prudential ceilings:
- Aggregate CME: 40% of eligible capital
- Direct investments: 20%
- Acquisition finance: 20% (within overall limit)
- Specifies exclusions for certain entities and instruments
- Standardises exposure computation and allows offsets with cash and government securities
Effective date
Applicable from the date of adoption of related Credit Facilities Directions or April 1, 2026, whichever is earlier.
RBI Updates Capital Adequacy Norms for Irrevocable Payment Commitments
The Reserve Bank of India (RBI) has issued the Commercial Banks – Prudential Norms on Capital Adequacy (Second Amendment) Directions, 2026, revising capital treatment for irrevocable payment commitments (IPCs) issued by banks.
Key update
- IPCs issued to clearing corporations on behalf of clients will be treated as financial guarantees with a 100% Credit Conversion Factor (CCF)
- Capital requirement will apply only to the portion classified as Capital Market Exposure (CME)
- The applicable risk weight is 125% on the CME amount
Effective date
The amendment becomes applicable from the date of adoption of the related Credit Facilities Directions or April 1, 2026, whichever is earlier.
RBI Introduces Enhanced Disclosure Framework for Capital Market Exposures
The Reserve Bank of India (RBI) has issued the Commercial Banks – Financial Statements: Presentation and Disclosures (Third Amendment) Directions, 2026, revising disclosure requirements in the Notes to Accounts to standardise reporting of capital market exposures.
Key updates
- Replaces the existing exposure disclosure format with a detailed “Exposure to Capital Markets” table
- Requires separate reporting of:
- Direct investments in equity, convertible instruments, non-debt mutual funds, REITs/InvITs, and AIFs
- Advances against shares or securities
- Lending to Capital Market Intermediaries (CMIs)
- Acquisition finance and bridge finance
- Financing to non-debt mutual funds
- Underwriting commitments
- Irrevocable Payment Commitments (IPCs)
- Trade and clearing-related exposures
- Mandates disclosure of total capital market exposure for both current and previous years
- Exposure values to be computed in line with the Concentration Risk Management and Credit Facilities Directions
Effective date
Applicable from the date of adoption of the related Credit Facilities Directions or April 1, 2026, whichever is earlier.
RBI Updates Guidelines on Financial Services Activities for Commercial Banks
The Reserve Bank of India (RBI) has issued the Commercial Banks – Undertaking of Financial Services Amendment Directions, 2026, revising specific provisions under the 2025 Directions to align with the updated Credit Facilities framework.
Key changes
- Permits acquisition finance and bridge finance for financing promoters’ stake in new companies
- Allows lending to individuals against eligible securities
These modifications update the scope of financial services activities that commercial banks may undertake under the general guidelines.
Effective date
The amendments apply from the date of adoption of the related Credit Facilities Directions or April 1, 2026, whichever is earlier.
RBI Amends Financial Services Guidelines for Commercial Banks
The Reserve Bank of India has issued the Commercial Banks – Undertaking of Financial Services Amendment Directions, 2026, updating the 2025 framework to refine the scope of permitted financing activities and align them with the revised Credit Facilities Directions.
Key updates
Acquisition & bridge finance
Permits acquisition finance and bridge finance for funding promoters’ stake in new companies.
Lending to individuals
Allows lending to individuals against eligible securities under prescribed norms.
Regulatory basis
Issued under Section 35A of the Banking Regulation Act, 1949 to standardise and strengthen financial service practices.
Effective date
Applicable from the earlier of bank adoption of the Credit Facilities Amendment Directions, 2026, or April 1, 2026.
RBI Revises Concentration Risk Framework for Small Finance Banks
The Reserve Bank of India has issued the Small Finance Banks – Concentration Risk Management Amendment Directions, 2026, updating the 2025 framework to strengthen monitoring and control of capital market exposures (CME).
Key changes
- Aligns definitions for CMIs, collateral, non-debt mutual funds, and primary security
- Expands CME to include investments, loans against securities, CMI exposures, underwriting commitments, IPCs, and clearing-related trades
- Sets prudential limits:
- Aggregate CME: 40% of Tier 1 capital
- Direct investment exposure: 20% of eligible capital
- Requires board-approved intra-day exposure limits
- Specifies exposure calculation methods and allows offsets against cash/government securities
- Exempts select exposures, including specified critical financial infrastructure institutions
Effective date: April 1, 2026, or earlier if adopted by the bank.
RBI Updates Capital Adequacy Norms for Irrevocable Payment Commitments
The Reserve Bank of India has issued the Small Finance Banks – Prudential Norms on Capital Adequacy (Second Amendment) Directions, 2026, revising capital treatment for irrevocable payment commitments (IPCs) issued by Small Finance Banks.
Key updates
- IPCs issued to clearing corporations on behalf of clients will be treated as financial guarantees with a Credit Conversion Factor (CCF) of 100%
- Capital is required only on the portion recognized as Capital Market Exposure (CME) under the Concentration Risk Management framework
- The applicable risk weight is 125% on the computed CME amount
Effective date: Applicable from April 1, 2026, or earlier if adopted by the bank.
RBI Introduces Enhanced Capital Market Exposure Disclosures for Small Finance Banks
The Reserve Bank of India has issued the Small Finance Banks – Financial Statements: Presentation and Disclosures (Second Amendment) Directions, 2026, updating disclosure requirements under the 2025 framework to standardise reporting of capital market exposures in financial statements.
Key updates
- Deletes the existing sub-paragraph under the ‘Exposures’ section of Notes to Accounts
- Introduces a dedicated disclosure table titled “Exposure to Capital Markets” to be reported in ₹ crore for the current and previous year
- Requires separate reporting of:
- Direct investments in equity, preference shares, convertible instruments, non-debt mutual funds, REITs, InvITs, and AIFs
- Advances to individuals for investment in market instruments
- Loans where shares or similar instruments are primary or collateral security
- Credit facilities to Capital Market Intermediaries (CMIs)
- Financing to non-debt mutual funds
- Acquisition finance for promoters’ share purchases in infrastructure projects
- Underwriting commitments
- Irrevocable Payment Commitments (IPCs)
- Clearing member trade exposures and funded margins
- Mandates computation of Capital Market Exposure (CME) in line with the Concentration Risk Management and Credit Facilities Directions
Effective date: Applicable from April 1, 2026, or earlier if adopted by the bank.
Lead Bank Assignment for Newly Formed Hansi District in Haryana
The Reserve Bank of India has notified the assignment of Lead Bank responsibility following the creation of a new district in the state of Haryana.
As per the Government notification, Hansi has been formed as a new district. The Lead Bank responsibility has been allocated to ensure coordinated implementation of banking and financial inclusion activities within the district.
Lead Bank designation
- District: Hansi
- Lead Bank: Punjab National Bank
- District Working Code: 02V (Numeral Zero, Numeral Two, Alphabet V)
There is no change in Lead Bank assignments for other districts in Haryana.
Streamlined ECB Framework: Key RBI Amendments at a Glance
The Reserve Bank of India has issued the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 under the Foreign Exchange Management Act, 1999 to standardise definitions, tighten end-use controls, and update norms for External Commercial Borrowings (ECBs), trade credits, and cross-border lending.
Effective date: From publication in the Official Gazette. Existing ECBs with an issued LRN continue under earlier norms, except for updated reporting.
Key highlights
- Definitions aligned: Clarifies terms such as arm’s length, benchmark rate, cost of borrowing, control, related party, real estate business, ECB, and ECL.
- End-use restrictions: Prohibits use for chit/nidhi activities, real estate (with limited exceptions), certain agriculture, TDR trading, securities investment, restricted/NPA loan repayment, and other specified purposes.
- Individual INR borrowings (NRI/OCI relatives): Allowed on non-repatriation basis with repayment to NRO accounts.
- Eligible borrowers/lenders: Resident entities; recognised overseas lenders, RBI-regulated branches, and IFSC institutions.
- Currency: Foreign currency or INR, with permitted conversions.
- Limits: Up to USD 1 billion or 300% of net worth (whichever higher), excluding certain regulated entities.
- Maturity: Minimum 3 years; shorter tenors allowed for manufacturing within limits.
- Security/refinancing: Asset charge, guarantees, refinancing, and conversion permitted subject to FEMA rules.
- Reporting: LRN required before drawdown; Forms ECB 1/2 mandatory; monitored by Authorised Dealer banks; late fees for delays.
The amendments establish a uniform, compliance-driven framework for cross-border borrowing and lending.
ECB Regulations Streamlined Under FEMA Amendment
The Reserve Bank of India has issued the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, revising the framework for External Commercial Borrowings (ECBs), trade credits, and cross-border lending under the Foreign Exchange Management Act, 1999.
Key Updates
- Consolidates ECB and INR borrowing provisions into a single, unified regulation
- Deletes overlapping sections from existing Master Directions and related FAQs
- Requires Authorised Dealer Category I banks to follow the amended Regulations for all eligible transactions
- Banks must inform customers of the revised framework
Effective Date
Applicable from the date of publication in the Official Gazette.
