**Executive Summary**
On October 03, 2025, the Reserve Bank of India (RBI) issued a draft regulatory framework for public comment regarding lending to related parties by various regulated entities (REs). These draft directions are in pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated December 08, 2023. Public and stakeholder comments are invited by October 31, 2025, via the "Connect2Regulate" section on the RBI website or by email.
**Key Points / Main Content**
* **Applicability:**
* The draft framework applies to various regulated entities (REs). This includes:
* Commercial Banks
* Small Finance Banks
* Regional Rural Banks
* Local Area Banks
* Urban Co-operative Banks
* Rural Co-operative Banks
* Non-Banking Financial Companies
* All India Financial Institutions
* **Framework Provisions:**
* Scale-based materiality thresholds are introduced, requiring Board or Committee approval for lending to related parties exceeding these thresholds.
* Independent Directors of other banks are excluded from the scope of "related persons" of a RE for the purposes of these Directions.
* Principle-based exemption from Section 20 (1) (b) of the Banking Regulation Act, 1949 is provided for certain loan types.
* REs must adhere to supervisory reporting and disclosure requirements for transactions with related parties.
**Impact Analysis**
**Regulated Entities (REs)**
* **Impact:** REs must adopt the harmonized, principle-based framework for lending to related parties, rationalizing existing provisions.
* **Action Required:** REs must review and adapt their lending policies and procedures to comply with the new framework. They also need to implement the updated reporting and disclosure requirements.
**Public/Stakeholders**
* **Impact:** Stakeholders have an opportunity to provide feedback on the draft directions before they are finalized.
* **Action Required:** Review the draft directions and submit comments/feedback by October 31, 2025, through the designated channels (RBI website "Connect2Regulate" section or email).
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for issuing the draft directions.
Reserve Bank of India (Lending to Related Parties) Directions, 2025: The draft regulatory framework addressing lending to related parties by regulated entities.
Statement on Developmental and Regulatory Policies: Policy statement serving as the basis for the regulatory framework on lending to related parties.
Banking Regulation Act, 1949: Indian legislation which, in Section 20 (1) (b), is referenced for exemption purposes.
प्रेस प्रकाशनी PRESS RELEASE
भारतीय �रज़वर् बैंक
RESERVE BANK OF INDIA
वेबसाइट : www.rbi.org.in/hindi संचार िवभाग, केंद्रीय कायार्लय, शहीद भगत िसंह मागर्, फोटर्, मुंबई - 400 001
Website : www.rbi.org.in Department of Communication, Central Office, Shahid Bhagat Singh Marg, Fort,
ई-मेल/email : helpdoc@rbi.org.in Mumbai - 400 001 फोन/Phone: 022 - 2266 0502
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
vii. Reserve Bank of India (Non-Banking Financial Companies – Lending to Related
Parties) Directions, 2025
viii. Reserve Bank of India (All India Financial Institutions – 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.
(Brij Raj)
Press Release: 2025-2026/1249 Chief General Manager