All about recent Major Changes in Commercial Bank Credit Definitions

RBI (Commercial Banks – Credit Facilities) Amendment Directions, 2026 dated: 13th February 2026 – New Definitions

Introduction:

• Unsecured Business Loans: Quick funding without collateral, ideal for operational needs.
• Loan Against Property: Borrowers pledge property as collateral for larger loans.
• Rapid Credit Facility: Offers quick access to funds through a simplified approval process.
• Revolving Credit Facility: Allows repeated borrowing and repayment within a fixed limit.
• Letter of Credit: Ensures timely payment to sellers, reducing transaction risk.
  Commercial banks aim to provide these credit facilities while ensuring financial stability and protecting depositors’ interests. 

Amendment:

Change in the definition of collateral security:

Old:

(vii) ‘Collateral Security’ or ‘Collateral’ means an existing asset of the borrower pledged to the lender for availing and securing a credit facility extended by the lender to the borrower.

New:

(vii) “Collateral security” or “Collateral” means an asset on which a security charge is created in favour of the lender for securing a credit facility.

New definition’ “Acquisition Finance” is introduced

4(1) (ia) “Acquisition Finance” shall mean a financial facility or assistance provided to an eligible borrower entity for the purpose of acquiring equity
shares or compulsorily convertible debentures (CCDs) in a target company or its holding company, resulting in the borrower entity acquiring control over the target company. Such funding may also involve refinancing of existing debt of the target company if the refinancing is integral to the acquisition finance.

New definition’ “Bridge Finance” is introduced

4(1)(iva) “Bridge Finance “shall mean financing a borrower for an interim period, not exceeding one year, for a legitimate business purpose where
the borrower has a firm plan and capability to repay such loans by raising financial resources either through issuance of equity, debt or hybrid instruments or by divestiture/hive-off of a part of existing business/assets within the interim period.

New definition’ “Capital Market Intermediaries (CMIs)” is introduced

4(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).

New definition “Control” is introduced

4(1)(viiia) “Control” shall have the same meaning as defined in Section 2(27) of the Companies Act, 2013.

 Section 2(27) of the Companies Act, 2013 “control” shall include the right to appoint majority of the directors or to control the management
or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

New definition “Eligible Securities” is introduced

4(1)(xivb) “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

New definition “Loan to Value (LTV)” is introduced

4(1)(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.

Formula: Outstanding loan/ value of securities

New definition “Margin” is introduced

4(1)(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.

New definition “non-financial company” is introduced

4(1) (xxiic) “Non-financial company” shall mean 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.

New definition “Primary Security” is introduced

(xxxa) “Primary Security” shall mean security created on assets which have been financed out of the credit facility extended to the borrower.