On November 28, 2025, the Reserve Bank of India (RBI) issued the Local Area Banks – Classification, Valuation, and Operation of Investment Portfolio Directions, 2025 under Section 35A of the Banking Regulation Act, 1949. These Directions aim to provide a regulatory framework for the classification, valuation, and management of investment portfolios of Local Area Banks (LABs). They apply to all LABs and are effective from the date of issuance. The Directions clarify that mere mention of any activity, transaction, or item does not automatically authorize it; banks must ensure compliance with applicable statutory and regulatory requirements before undertaking any transaction. The RBI, exercising its powers in the public interest, emphasizes prudent management and adherence to regulatory norms to maintain financial stability and safeguard depositor interests. These Directions reinforce RBI’s supervisory role in ensuring that investment portfolios of LABs are managed responsibly, with proper valuation and classification, consistent with the broader regulatory framework.
RESERVE BANK OF INDIA
RBI/DOR/2025-26/236
DOR.MRG.REC.No.155/00-00-001/2025-26 | Dated: November 28, 2025
Reserve Bank of India (Local Area Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025
In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, (‘BR Act’) and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, the RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.
Chapter I: Preliminary
A. Short Title
1. These Directions shall be called the Reserve Bank of India (Local Area Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025.
B. Effective Date
2. These Directions shall come into effect from the date of issue.
C. Applicability
3. These Directions shall be applicable to Local Area Banks (hereinafter collectively referred to as ‘banks’ and individually as a ‘bank’).
Note: Mere mention of an activity, transaction, or item in these directions does not imply that it is permitted, and the bank shall refer to the extant statutory and regulatory requirements while determining the permissibility or otherwise of an activity, transaction, or item.
Read Full text of the Notification: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/236MD.pdf
