RBI Amendments Report – 5th January 2026

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Date of Issue: January 05, 2026

Subject: Harmonized Framework for Lending to Related Parties & Financial Statement Disclosures.

Overview: The Reserve Bank of India has issued 16 distinct Amendment Directions to rationalize and harmonize the norms for “Lending to Related Parties” across all Regulated Entities (REs). These amendments introduce a principle-based framework, stricter governance on “Quid Pro Quo” lending, and enhanced disclosure requirements effective from April 01, 2026.

Part A: Credit Risk Management Amendments

(i) RBI (Commercial Banks – Credit Risk Management) Amendment Directions, 2026

Applicable Entity Scheduled Commercial Banks (SCBs), excluding RRBs.
Specific Changes Required
  • Board Approval Thresholds: Mandatory Board/Audit Committee approval for Related Party Transactions (RPTs) exceeding ₹50 crore (for large banks) or ₹10 crore (for mid-sized banks).
  • “Related Party” Redefinition: Expanded definition to include substantial shareholders (>10% holding), Key Managerial Personnel (KMPs), and entities under their control/influence.
  • Quid Pro Quo Ban: Strict prohibition on reciprocal lending arrangements designed to circumvent limits.
Management Action Plan
  1. Policy Update: Revise the Credit Policy to incorporate new materiality thresholds.
  2. Database Scrubbing: Update the “Related Party” master list in the Core Banking System (CBS) to include new categories of relatives and entities.
  3. Audit Mandate: Direct Internal Audit to verify all existing RPTs for “Arm’s Length” compliance within 90 days.

(ii) RBI (Small Finance Banks – Credit Risk Management) Amendment Directions, 2026

Applicable Entity Small Finance Banks (SFBs).
Specific Changes Required
  • Materiality Limit: Board approval required for aggregate RPT exposures exceeding ₹5 crore.
  • Harmonization: Alignment of RPT identification processes with universal banks to remove regulatory arbitrage.
  • Independent Directors: Clarification that Independent Directors of other banks are not automatically “Related Parties”.
Management Action Plan
  1. System Control: Hard-code the ₹5 crore limit in the Loan Origination System (LOS) to trigger automatic referral to the Board.
  2. Gap Analysis: Assess current exposures against the new limit and prepare a “Run-off Plan” for breaches.

(iii) RBI (Local Area Banks – Credit Risk Management) Amendment Directions, 2026

Applicable Entity Local Area Banks (LABs).
Specific Changes Required
  • Definition Compliance: Strict adoption of the Companies Act/Accounting Standards definition for “Relative”.
  • Legacy Loans: Strict prohibitions on renewing or enhancing existing RPT loans that do not meet the new “Arm’s Length” criteria.
Management Action Plan
  1. Manual Verification: Given localized operations, physically verify the “Interest Declarations” of Directors against local business registries.
  2. Staff Training: Train branch managers on the “Quid Pro Quo” prohibition to prevent informal reciprocal lending in local networks.

(iv) RBI (Urban Co-operative Banks – Credit Risk Management) Amendment Directions, 2026

Applicable Entity Primary (Urban) Co-operative Banks (UCBs).
Specific Changes Required
  • Director Interest: Tighter scrutiny on loans to firms/trusts where Directors have an “interest” (removing previous ambiguities).
  • Parity: Bringing UCBs at par with Commercial Banks regarding “Director Related” lending prohibitions to professionalize governance.
Management Action Plan
  1. Declaration Drive: Obtain fresh, detailed “Interest Declarations” from all Directors under the new format immediately.
  2. Bylaw Review: Check if current Cooperative bylaws conflict with new Directions (Directions override bylaws).

(v) RBI (Regional Rural Banks – Credit Risk Management) Amendment Directions, 2026

Applicable Entity Regional Rural Banks (RRBs).
Specific Changes Required
  • Sponsor Alignment: RPT procedures must align with the Sponsor Bank’s risk framework while adhering to RRB-specific limits.
  • Agri-Exemptions: Specific principle-based exemptions for agricultural loans to relatives if they meet standard eligibility.
Management Action Plan
  1. Coordination: Consult with the Sponsor Bank to adopt their RPT identification software/module.
  2. Policy Adoption: Adopt the amended Credit Policy in the upcoming Board meeting.

(vi) RBI (Rural Co-operative Banks – Credit Risk Management) Amendment Directions, 2026

Applicable Entity State/Central Co-operative Banks.
Specific Changes Required
  • Governance Upgrade: Professional scrutiny mandated for loans to cooperative society office bearers.
  • Systematic Reporting: Mandatory transition from manual RPT monitoring to system-based tracking.
Management Action Plan
  1. Special Audit: Conduct a special audit of all loans to Managing Committee members.
  2. Digitization: Digitize the “Interest Register” to enable real-time checking during loan sanction.

(vii) RBI (NBFCs – Credit Risk Management) Amendment Directions, 2026

Applicable Entity NBFCs (Base, Middle, Upper Layers).
Specific Changes Required
  • Layer-based Limits:
    – Upper/Middle Layer: Board approval > ₹10-50 crore.
    – Base Layer: Board approval > ₹5 crore.
  • Group Exposure: Strict limits on lending to Group Companies (associates/subsidiaries) to prevent “evergreening”.
  • Independence: Credit decisions for RPTs must be independent of the interested Director/KMP.
Management Action Plan
  1. Committee Formation: Constitute a specialized “RPT Sub-Committee” (if not existing) for vetting proposals.
  2. Software Patch: Update LMS to block sanctions to listed RPT PANs without specific override codes.

(viii) RBI (AIFIs – Credit Risk Management) Amendment Directions, 2026

Applicable Entity AIFIs (NABARD, NHB, SIDBI, EXIM, NaBFID).
Specific Changes Required
  • Best Practices: Adoption of the highest standard of RPT governance as a model for the sector.
  • Project Finance: Specific scrutiny on Project Loans where related parties are implementation partners/contractors.
Management Action Plan
  1. Vendor Due Diligence: Enhance vendor due diligence to identify indirect RPTs in large project finance deals.

Part B: Financial Statements & Disclosures Amendments

(ix) RBI (Commercial Banks – Financial Statements) Amendment Directions, 2026

Applicable Entity Scheduled Commercial Banks.
Specific Changes Required
  • Granular Disclosure: “Notes to Accounts” must include Aggregate exposure, Max outstanding during the year, and Provisions held against RPTs.
  • Standardization: Adoption of the new standardized RBI disclosure table.
Management Action Plan
  1. GL Reconfiguration: Tag all “Related Party” accounts in the General Ledger.
  2. Dry Run: Conduct a dry run of the new format for Q3 FY26 results.

(x) RBI (Small Finance Banks – Financial Statements) Amendment Directions, 2026

Applicable Entity Small Finance Banks.
Specific Changes Required
  • Consistency Check: Financial statement disclosures must match data reported in the RBI DAKSH return.
  • Off-Balance Sheet: Mandatory disclosure of Guarantees/LCs issued to Related Parties.
Management Action Plan
  1. Reconciliation: Establish monthly reconciliation between Regulatory Reporting and Finance teams.

(xi) RBI (Local Area Banks – Financial Statements) Amendment Directions, 2026

Applicable Entity Local Area Banks.
Specific Changes Required
  • Simplified Format: Adoption of the revised disclosure format suitable for non-listed entities.
Management Action Plan
  1. Auditor Briefing: Discuss new format with Statutory Auditors immediately to prevent year-end delays.

(xii) RBI (Regional Rural Banks – Financial Statements) Amendment Directions, 2026

Applicable Entity Regional Rural Banks.
Specific Changes Required
  • Mandatory Table: Disclosure of “Loans to Directors/Relatives” in the specific RBI-mandated table within the Annual Report.
Management Action Plan
  1. MIS Update: Modify the MIS generated for the Annual Report to automatically populate the RPT table.

(xiii) RBI (Urban Co-operative Banks – Financial Statements) Amendment Directions, 2026

Applicable Entity Urban Co-operative Banks.
Specific Changes Required
  • Firm Interests: Disclosure of loans to “Firms in which Directors are interested” (Proprietorship/Partnership).
  • Penalty Linkage: Linkage of RPT violations with the “Penalty Imposed by RBI” disclosure section.
Management Action Plan
  1. Checklist: Create a “Disclosure Checklist” for the CFO/Chief Accountant to ensure no RPT is omitted.

(xiv) RBI (Rural Co-operative Banks – Financial Statements) Amendment Directions, 2026

Applicable Entity State/Central Co-operative Banks.
Specific Changes Required
  • Transparency: New disclosure requirements to boost public confidence by revealing insider lending.
Management Action Plan
  1. Training: Train accounting staff at Head Office on the new disclosure templates.

(xv) RBI (NBFCs – Financial Statements) Amendment Directions, 2026

Applicable Entity All NBFCs.
Specific Changes Required
  • Ind AS Alignment: Strict alignment with Ind AS 24 for all NBFCs.
  • Top Exposures: Requirement to disclose details of the top 10 RPT exposures by value.
Management Action Plan
  1. Policy Review: Update “Policy on Materiality of RPTs” for new disclosure norms.
  2. Automation: Automate RPT data extraction to avoid manual errors in financial statements.

(xvi) RBI (AIFIs – Financial Statements) Amendment Directions, 2026

Applicable Entity All India Financial Institutions.
Specific Changes Required
  • Comprehensive Reporting: Full disclosure of all intra-group transactions and dealings with Directors/KMPs.
Management Action Plan
  1. Compliance Certificate: Obtain a certificate from the Company Secretary on RPT disclosures before finalizing accounts.

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