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.
RBI Credit Risk Management Amendment Directions, 2026
The Reserve Bank of India has issued the Commercial Banks – Credit Risk Management (Amendment) Directions, 2026, amending the 2025 Directions under the Banking Regulation Act, 1949.
Summary of Amendments
- Updated Definitions: New and revised definitions for directors, promoters, KMPs, related persons/parties, specified employees, personal loans, and control, aligned with the Companies Act, 2013 and IBC, 2016.
- Board-Approved Policy: Banks must maintain a comprehensive Board-approved credit risk policy, including specific provisions on lending to related parties and other key risk areas.
- Revised Statutory Restrictions: Certain provisions are deleted and clarified, including restrictions and permitted exceptions for lending to directors, related entities, and foreign bank branches in India.
- Lending to Related Parties Framework: Introduction of a structured framework covering governance, regulatory prohibitions, materiality thresholds based on asset size, approval requirements, recusal of interested parties, monitoring, audit, and reporting.
- Enforcement: Non-compliance may lead to supervisory and enforcement actions by the RBI.
Effective Date
The amendments take effect from April 1, 2026. Existing non-conforming related party exposures may run off till maturity but cannot be renewed or enhanced unless compliant. Consequential amendments to financial statement disclosure directions have been issued separately.
RBI Credit Risk Management Amendments for Small Finance Banks, 2026
The Reserve Bank of India has issued the Small Finance Banks – Credit Risk Management (Amendment) Directions, 2026, amending the 2025 Directions under the Banking Regulation Act, 1949.
Overview of Changes
- Updated Definitions: Revised and new definitions for directors, promoters, KMPs, related persons/parties, specified employees, control, personal loans, and relatives, aligned with the Companies Act, 2013 and IBC, 2016.
- Board-Approved Policy: Mandatory comprehensive Board-approved credit risk policy, including provisions on lending to related parties and other key risk areas.
- Revised Restrictions: Clarified statutory restrictions and permitted exceptions for lending to directors, trusts, and related entities, subject to prescribed safeguards.
- Related Party Lending Framework: Introduction of a detailed framework covering governance, prohibitions, materiality thresholds based on asset size, approval requirements, recusal, monitoring, audit, and reporting.
- Enforcement: RBI may take supervisory and enforcement action for non-compliance.
Effective Date
The amendments take effect from April 1, 2026. Existing non-compliant related party exposures may run off till maturity but cannot be renewed or enhanced unless compliant. Consequential amendments to disclosure directions have been issued separately.
RBI Credit Risk Management Amendments for Local Area Banks, 2026
The Reserve Bank of India has issued the Local Area Banks – Credit Risk Management (Amendment) Directions, 2026, amending the 2025 Directions under the Banking Regulation Act, 1949.
Summary of Amendments
- Updated Definitions: Revised definitions for directors, promoters, KMPs, related persons/parties, specified employees, control, personal loans, and relatives, aligned with applicable laws.
- Board-Approved Policy: Mandatory comprehensive Board-approved credit risk management policy, including lending to related parties and key risk areas.
- Related Party Lending Framework: Introduction of a dedicated framework covering governance oversight, regulatory prohibitions, approval requirements, recusal of interested parties, monitoring, and audit.
- Materiality Threshold: Related-party loans above ₹10 lakh require approval by the Board or the Committee on Lending to Related Parties.
- Enforcement: RBI may initiate supervisory and enforcement actions for non-compliance.
Effective Date
The amendments are effective from April 1, 2026. Existing non-compliant exposures may run off till maturity but cannot be renewed or enhanced unless compliant. Consequential disclosure amendments have been issued separately.
RBI Credit Risk Management Amendments for Regional Rural Banks, 2026
The Reserve Bank of India has issued the Regional Rural Banks – Credit Risk Management (Amendment) Directions, 2026, amending the 2025 Directions under the Banking Regulation Act, 1949.
Summary of Changes
- Revised Definitions: Updated definitions for directors, promoters, KMPs, related persons/parties, specified employees, control, personal loans, and relatives, aligned with applicable laws.
- Board-Approved Policy: Mandatory comprehensive Board-approved credit risk management policy, including lending to related parties and key operational areas.
- Related Party Lending Framework: Introduction of a detailed framework covering governance, prohibitions, aggregate and sub-limits, materiality thresholds based on asset size, approval requirements, recusal of interested parties, monitoring, audit, and reporting.
- Materiality Thresholds: Related-party loans above prescribed limits (₹10 lakh to ₹50 lakh, based on asset size) require Board or Committee approval.
- Enforcement & Transition: Effective from April 1, 2026. Existing non-compliant exposures may run off till maturity but cannot be renewed or enhanced unless compliant. Consequential disclosure amendments have been issued separately.
RBI Credit Risk Management Amendments for Urban Co-operative Banks – 2026
The Reserve Bank of India has issued the Urban Co-operative Banks – Credit Risk Management (Amendment) Directions, 2026, amending the 2025 Directions under the Banking Regulation Act, 1949.
Summary of Changes
- Updated Definitions: Revised definitions for directors (including BoM), KMPs, specified employees, related persons/parties, control, lending, and personal loans.
- Board-Approved Policy: Mandatory comprehensive Board-approved credit risk management policy, including lending to related parties, property valuation, and review/renewal of credit facilities.
- Lending Restrictions: Clear prohibitions on lending to directors and connected entities, with limited, defined exceptions subject to safeguards.
- Related Party Lending Framework: Introduction of a structured framework covering governance, regulatory prohibitions, aggregate and sub-limits, materiality thresholds by UCB tier, Board-level approvals, recusal, monitoring, audit, and reporting.
- Materiality Thresholds: Related-party loans above prescribed ceilings (₹10 lakh to ₹1 crore, based on UCB tier) require Board approval.
- Effective Date & Transition: Effective from April 1, 2026. Existing non-compliant exposures may run off till maturity but cannot be renewed or enhanced unless compliant. Consequential disclosure amendments have been issued separately.
RBI Credit Risk Management Amendments for Rural Co-operative Banks, 2026
RBI has issued the Rural Co-operative Banks – Credit Risk Management (Amendment) Directions, 2026, amending the 2025 Directions under the Banking Regulation Act, 1949.
Summary of Changes
- Definitions Updated: Revised definitions for directors, KMPs, related persons/parties, control, lending, and personal loans.
- Board-Approved Policy: Mandatory comprehensive credit risk policy, including lending to related parties and valuation norms.
- Related Party Lending Framework: New framework covering governance, prohibitions, limits, approvals, recusal, monitoring, audit, and reporting.
- Materiality Thresholds: Related-party loans above ₹25 lakh–₹75 lakh (based on asset size) require Board approval.
- Effective Date: April 1, 2026; existing non-compliant exposures may run off till maturity but cannot be renewed or enhanced unless compliant.
RBI Updates Credit Risk Rules for NBFCs, 2026
The Reserve Bank of India has issued the NBFC – Credit Risk Management (Amendment) Directions, 2026, amending the 2025 framework under applicable RBI, NHB, and Factoring laws.
Key Points
- Applicability: Certain provisions apply only to Notified NBFCs.
- Definitions Updated: Clear definitions for related parties, related persons, promoters, directors, KMPs, specified employees, and lending.
- Lending to Related Parties: A new regulatory framework covering Board oversight, credit policy requirements, safeguards, recusal of interested parties, monitoring, audits, and reporting.
- Materiality Thresholds (per transaction):
- Upper & Top Layer: ₹10 crore
- Middle Layer: ₹5 crore
- Base Layer: ₹1 crore
Loans above these limits require Board or Board Committee approval.
- Enforcement: Non-compliance may attract supervisory and enforcement actions, including penalties and restrictions.
- Effective Date: April 1, 2026; existing non-compliant exposures may run off to maturity without renewal or enhancement.
RBI Updates Credit Risk Rules for All-India Financial Institutions, 2026
The Reserve Bank of India has issued the All-India Financial Institutions – Credit Risk Management (Amendment) Directions, 2026, updating the 2025 framework.
Key Points:
- Definitions & Scope: Clarifies terms for related parties, directors, KMPs, promoters, and lending.
- Board Policies: AIFIs must maintain comprehensive credit risk policies covering lending to related parties, safeguards, sub-limits, LEI, and revolving credit restrictions.
- Lending Restrictions: Loans against AIFI shares are prohibited; lending to directors and related parties is limited with specific exemptions.
- Materiality Thresholds:
- ₹10,00,000 crore → ₹25 crore
- ₹1,00,000–10,00,000 crore → ₹10 crore
- < ₹1,00,000 crore → ₹5 crore
- Monitoring & Reporting: Maintain updated records of all related party exposures; periodic audits and Board reporting required.
- Enforcement: Non-compliance may result in penalties, provisioning, audits, and other regulatory actions.
- Effective Date: April 1, 2026; existing non-compliant exposures may run off to maturity without renewal or enhancement.
RBI Updates Disclosure Norms for Commercial Banks (2026)
The Reserve Bank of India has issued the Commercial Banks – Financial Statements: Presentation and Disclosures (Second Amendment) Directions, 2026, updating the 2025 framework in line with recent credit risk management amendments.
Key Highlights:
- Related Party Disclosures: Banks must report exposures to related parties, including:
- Loans sanctioned and outstanding
- Proportion of total credit exposure
- Special Mention Accounts (SMA) and Non-Performing Assets (NPA)
- Provisions held against such loans
- Contracts and arrangements awarded to related parties
- Presentation Format: Data to be disclosed in financial statements under a standard table format.
- Effective Date: April 1, 2026; early implementation is permitted.
Enhanced Transparency in Related-Party Disclosures for Small Finance Banks
The Reserve Bank of India (RBI) has issued the Small Finance Banks – Financial Statements: Presentation and Disclosures Amendment Directions, 2026, following updates to the Credit Risk Management Directions, 2026.
Effective April 1, 2026, these amendments require Small Finance Banks to disclose all exposures to related parties in their financial statements. Banks must report:
- Loans to Related Parties
- Total loans sanctioned during the year
- Outstanding loans as of March 31
- Outstanding loans as a percentage of total credit
- Loans classified as Special Mention Accounts (SMA) or Non-Performing Assets (NPA)
- Provisions held against these loans
- Contracts and Arrangements with Related Parties
- Total contracts awarded during the year
- Outstanding contracts as of March 31
Local Area Banks to Enhance Related-Party Disclosure
The Reserve Bank of India (RBI) has issued the Local Area Banks – Financial Statements: Presentation and Disclosures Amendment Directions, 2026, following updates to the Credit Risk Management Directions, 2026.
Effective April 1, 2026, Local Area Banks are required to disclose all exposures to related parties in their financial statements. Disclosures must include:
- Loans to Related Parties
- Total loans sanctioned during the year
- Outstanding loans as of March 31
- Loans as a percentage of total credit exposure
- Loans classified as Special Mention Accounts (SMA) or Non-Performing Assets (NPA)
- Provisions held against these loans
- Contracts and Arrangements with Related Parties
- Total contracts awarded during the year
- Outstanding contracts as of March 31
Regional Rural Banks Update Related-Party Disclosure
The Reserve Bank of India (RBI) has issued the Regional Rural Banks – Financial Statements: Presentation and Disclosures Amendment Directions, 2026, following updates to the Credit Risk Management Directions, 2026.
Effective April 1, 2026, Regional Rural Banks are required to disclose all exposures to related parties in their financial statements, including:
- Loans to Related Parties
- Total loans sanctioned during the year
- Outstanding loans as of March 31
- Loans as a percentage of total credit exposure
- Loans classified as Special Mention Accounts (SMA) or Non-Performing Assets (NPA)
- Provisions held against these loans
- Contracts and Arrangements with Related Parties
- Total contracts awarded during the year
- Outstanding contracts as of March 31
Urban Co-operative Banks: Enhanced Related-Party Disclosure
The Reserve Bank of India (RBI) has issued the Urban Co-operative Banks – Financial Statements: Presentation and Disclosures Amendment Directions, 2026, following updates to the Credit Risk Management Directions, 2026.
Effective April 1, 2026, Urban Co-operative Banks are required to disclose all exposures to related parties in their financial statements, covering:
- Loans to Related Parties
- Total loans sanctioned during the year
- Outstanding loans as of March 31
- Loans as a percentage of total credit exposure
- Loans classified as Special Mention Accounts (SMA) or Non-Performing Assets (NPA)
- Provisions held against these loans
- Contracts and Arrangements with Related Parties
- Total contracts awarded during the year
- Outstanding contracts as of March 31
Rural Co-operative Banks: Updated Related-Party Disclosure Requirements
The Reserve Bank of India (RBI) has issued the Rural Co-operative Banks – Financial Statements: Presentation and Disclosures Amendment Directions, 2026, following updates to the Credit Risk Management Directions, 2026.
Effective April 1, 2026, Rural Co-operative Banks must disclose all exposures to related parties in their financial statements, including:
- Loans to Related Parties
- Loans sanctioned during the year
- Outstanding loans as of March 31
- Loans as a percentage of total credit exposure
- Loans classified as Special Mention Accounts (SMA) or Non-Performing Assets (NPA)
- Provisions held against these loans
- Contracts and Arrangements with Related Parties
- Contracts awarded during the year
- Outstanding contracts as of March 31
NBFCs: Updated Related-Party Disclosure Guidelines
The Reserve Bank of India (RBI) has issued the Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures Amendment Directions, 2026, following updates to the Credit Risk Management Directions, 2026.
Effective April 1, 2026, NBFCs are required to disclose all exposures to related parties in their financial statements, including:
- Loans to Related Parties
- Loans sanctioned during the year
- Outstanding loans as of March 31
- Loans as a percentage of total credit exposure
- Loans classified as Special Mention Accounts (SMA) or Non-Performing Assets (NPA)
- Provisions held against these loans
- Contracts and Arrangements with Related Parties
- Contracts awarded during the year
- Outstanding contracts as of March 31
AIFIs: Updated Related-Party Disclosure Requirements
The Reserve Bank of India (RBI) has issued the All India Financial Institutions – Financial Statements: Presentation and Disclosures Amendment Directions, 2026, following updates to the Credit Risk Management Directions, 2026.
Effective April 1, 2026, AIFIs are required to disclose all exposures to related parties in their financial statements, including:
- Loans to Related Parties
- Loans sanctioned during the year
- Outstanding loans as of March 31
- Loans as a proportion of total credit exposure
- Loans classified as Special Mention Accounts (SMA) or Non-Performing Assets (NPA)
- Provisions held against these loans
- Contracts and Arrangements with Related Parties
- Contracts awarded during the year
- Outstanding contracts as of March 31
RBI Updates Capital Adequacy Norms for Commercial Banks – 2026
The Reserve Bank of India (RBI) has issued the Commercial Banks – Prudential Norms on Capital Adequacy (Amendment) Directions, 2026, updating the 2025 guidelines.
Key changes include:
- Risk Weighting of Non-Resident Corporate Claims:
- Claims on non-resident corporates will now be risk-weighted based on ratings from international agencies: S&P, Fitch, Moody’s, and CareEdge Global IFSC Limited (for exposures originating at International Financial Services Centres).
- Unrated claims exceeding ₹200 crore, or previously rated claims that become unrated above ₹100 crore, will attract a 150% risk weight.
- Claims on unrated corporates cannot receive more favourable treatment than the sovereign of their incorporation.
- Approved Credit Rating Agencies:
Banks may use ratings from CareEdge Global IFSC Limited, Fitch, Moody’s, and S&P for capital adequacy calculations.
Strengthening Risk Management for Small Finance Banks
The Reserve Bank of India (RBI) has issued the 2026 Amendments to the Prudential Norms on Capital Adequacy for Small Finance Banks. These amendments provide updated guidelines for calculating capital requirements on loans to non-resident corporates.
Key updates include:
- Risk Weighting by Credit Ratings: Loans to foreign companies must be assigned risk weights based on ratings from S&P, Fitch, Moody’s, or CareEdge Global IFSC Limited (for loans originating in International Financial Services Centres).
- Handling Unrated Loans: Large unrated exposures are treated as higher risk, with risk weights up to 150% depending on loan size and prior ratings.
- Approved Rating Agencies: Banks may use ratings from CareEdge IFSC, Fitch, Moody’s, and S&P to determine capital adequacy.
RBI Updates Capital Adequacy Norms for AIFIs (2026)
The Reserve Bank of India has issued the All India Financial Institutions (AIFIs) – Prudential Norms on Capital Adequacy Amendment Directions, 2026, amending the 2025 framework.
The amendments revise risk weights for claims on non-resident corporates based on ratings from recognised international credit rating agencies. For non-resident corporate exposures originating at the International Financial Services Centre (IFSC), risk weight mapping based on ratings by CareEdge Global IFSC Limited has been prescribed.
The Directions also specify higher risk weights for certain large unrated exposures and clarify that unrated claims cannot attract a risk weight lower than that of the relevant sovereign. CareEdge Global IFSC Limited, along with Fitch, Moody’s, and Standard & Poor’s, is recognised for rating purposes where applicable.
The amendments are effective immediately.
RBI Notifies Foreign Exchange Management (Guarantees) Regulations, 2026
The Reserve Bank of India (RBI) has issued the Foreign Exchange Management (Guarantees) Regulations, 2026, governing guarantees where any party is a person resident outside India. Authorised Dealer (AD) banks are required to follow these regulations while facilitating such guarantees and ensure compliance with related regulatory instructions issued by the Department of Regulation, RBI.
The Regulations introduce comprehensive reporting requirements for all guarantees—issued, modified, or invoked—through a prescribed form (GRN) to be submitted to AD banks. Detailed instructions on the compilation and submission of returns by AD banks will be communicated separately.
With the issuance of these Regulations, certain earlier A.P. (DIR Series) Circulars stand superseded, quarterly reporting on guarantees for Trade Credit is discontinued from the quarter ending March 2026, and relevant guarantee-related provisions across multiple FEMA Master Directions have been amended.
AD banks are required to inform their customers and constituents of these changes. The Regulations have been issued under the Foreign Exchange Management Act, 1999, without prejudice to any other approvals required under applicable laws.
Foreign Exchange Management (Guarantees) Regulations, 2026
The Reserve Bank of India has notified the Foreign Exchange Management (Guarantees) Regulations, 2026, replacing the earlier FEMA guarantee regulations. The Regulations apply to guarantees involving persons resident in India and non-residents and are effective from the date of publication in the Official Gazette.
They define key roles such as authorised dealer, surety, principal debtor, creditor, and guarantee (including counter-guarantee), and restrict residents in India from participating in cross-border guarantees except as permitted under FEMA or with RBI approval. Specific exemptions apply, including certain guarantees by authorised dealer bank branches, custodian bank commitments, and guarantees under overseas investment regulations.
Residents may act as surety, principal debtor, or creditor subject to FEMA compliance. The Regulations mandate quarterly reporting of guarantees to authorised dealer banks, with delayed reporting attracting a prescribed Late Submission Fee.
