The Reserve Bank of India (RBI) has published draft regulatory frameworks, collectively titled the “Reserve Bank of India (Lending to Related Parties) Directions, 2025,” for public comment by October 31, 2025. These draft directions apply to a wide array of Regulated Entities (REs), including Commercial Banks, Small Finance Banks, Cooperative Banks, NBFCs, and All India Financial Institutions. The proposed framework aims to establish a consistent, principle-based approach to lending to related parties by rationalizing existing provisions. Key proposals include introducing scale-based materiality thresholds that mandate Board or Committee approval for related-party lending exceeding set limits. The framework also excludes Independent Directors of other banks from being considered ‘related persons,’ offers principle-based exemptions from Section 20(1)(b) of the Banking Regulation Act, 1949 for specific loans, and mandates detailed supervisory reporting and disclosure requirements for all REs regarding related-party transactions. This initiative is part of an earlier commitment to harmonize and strengthen prudential regulations on related-party lending
Reserve Bank of India
October 03, 2025
RBI invites comments on the Draft “Reserve Bank of India (Lending to Related Parties) Directions, 2025”
In pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated December 08, 2023, the Reserve Bank of India (RBI) has today issued the draft regulatory framework, for public comments, on lending to related parties by various regulated entities (REs), as enumerated below:
i. Reserve Bank of India (Commercial Banks – Lending to Related Parties) Directions, 2025
ii. Reserve Bank of India (Small Finance Banks – Lending to Related Parties) Directions, 2025
iii. Reserve Bank of India (Regional Rural Banks – Lending to Related Parties) Directions, 2025
iv. Reserve Bank of India (Local Area Banks – Lending to Related Parties) Directions, 2025
v. Reserve Bank of India (Urban Co-operative Banks – Lending to Related Parties) Directions, 2025
vi. Reserve Bank of India (Rural Co-operative Banks – Lending to Related Parties) Directions, 2025
The draft Directions provide a harmonised, principle-based framework to be adopted by REs for inter alia lending to related parties, suitably rationalising the existing provisions. The key provisions of the proposed framework entail the following:
a) Introduction of scale-based materiality thresholds beyond which lending to related parties of a RE shall need approval of the Board or its Committee.
b) Exclusion of Independent Directors of other banks from the scope of ‘related persons’ of a RE for the purpose of these Directions.
c) Principle based exemption from Section 20 (1) (b) of the Banking Regulation Act, 1949 for certain types of loans.
d) Suitable supervisory reporting and disclosure requirements by REs on transactions with related parties.
The Comments on the draft Direction are invited from public/stakeholders by October 31, 2025. The comments/ feedback may be submitted through the link under the ‘Connect2Regulate’ Section available on the Reserve Bank’s website. Comments may alternatively be forwarded to The Chief General Manager, Credit Risk Group, Department of Regulation, Central Office Reserve Bank of India, 12th/ 13th Floor Shahid Bhagat Singh Marg, Fort Mumbai – 400 001 or by email.
Press Release: 2025-2026/1249
(Brij Raj)
Chief General Manager
