**Executive Summary**
The Reserve Bank of India (RBI) has issued Amendment Directions, 2026, to the Mortgage Guarantee Companies (MGCs) Directions, 2025 (Master Direction). The amendment aims to clarify the computation of Owned Fund and review the definition of Tier 1 capital for compliance with credit/investment concentration norms. These directions come into force with immediate effect.
**Key Points / Main Content**
* **Amendment Title:** Reserve Bank of India (Mortgage Guarantee Companies) Amendment Directions, 2026.
* **Effective Date:** Immediate.
* **Purpose:** Clarify the components reckoned in the computation of Owned Fund and to review the definition of Tier 1 capital.
* **Modification to Master Direction:**
* **Owned Fund (Paragraph 8(25) replacement):**
* "Owned fund" includes paid-up equity capital, free reserves (including quarterly profits), contingency reserves, share premium account, and capital reserves, less accumulated loss balance, book value of intangible assets, and deferred revenue expenditure.
* Inclusion of quarterly profits is subject to:
* Limited quarterly review of financial statements by statutory auditors.
* Reduction by the average dividend paid in the last three years.
* Eligible profit calculation: EPt = NPt - 0.25 *D*t
* Losses in the current year shall be fully deducted from Owned Fund.
* MGCs are not required to deduct Right-of-Use (ROU) asset (created in terms of Ind AS 116-Leases) from Owned Fund if the underlying asset is a tangible asset.
* **Tier 1 Capital (Paragraph 41 insertions):**
* Applicable Tier 1 Capital shall be determined based on the MGC's latest available financial statements (audited or subject to limited review).
* "Tier 1 Capital" is defined as in paragraph 8(31) of the Master Directions.
**Impact Analysis**
**Stakeholder: Mortgage Guarantee Companies (MGCs)**
* **Impact:**
* Revised criteria for calculating Owned Fund, including the inclusion of quarterly profits subject to specific conditions.
* Clarification on the treatment of Right-of-Use (ROU) assets in the calculation of Owned Fund.
* Requirement to determine applicable Tier 1 Capital based on the latest available financial statements.
* **Action Required:**
* Implement changes in the calculation of Owned Fund as per the revised directions.
* Ensure compliance with the revised definition and determination of Tier 1 Capital.
* Ensure that the financial statements are subjected to limited quarterly review by the statutory auditors.
Key Entities Referenced
Reserve Bank of India (Mortgage Guarantee Companies) Amendment Directions, 2026: Amendment directions issued by the Reserve Bank of India pertaining to Mortgage Guarantee Companies.
Reserve Bank of India (Mortgage Guarantee Companies) Directions, 2025: The 'Master Direction' which the current amendment directions modify.
Reserve Bank of India Act, 1934: The Act under which the Reserve Bank of India derives its powers, specifically section 45JA, to regulate Mortgage Guarantee Companies.
Mortgage Guarantee Companies (MGCs): The entities to which the amendment directions apply.
Reserve Bank of India: The central bank of India, the issuer of the policy
भारतीय ररजर्व बैंक
_________________________RESERVE BANK OF INDIA ______________________
www.rbi.org.in
RBI/2025-26/___
DOR.CAP.REC.No.XX/21.01.002/2025-26 January 13, 2026
All Mortgage Guarantee Companies (MGCs)
Dear Sir / Madam,
Reserve Bank of India (Mortgage Guarantee Companies) Amendment
Directions, 2026 – Draft for Comments
The Reserve Bank had issued the Reserve Bank of India (Mortgage Guarantee
Companies) Directions, 2025 (hereafter referred as the ‘Master Direction’), on
November 28, 2025, as amended from time to time. There is a need to further
amend the same to provide clarification on the components reckoned in the
computation of Owned Fund, as well as to review the definition of Tier 1 capital being
reckoned for complying with extant credit / investment concentration norms.
2. Accordingly, in exercise of the powers conferred under section 45JA of Reserve
Bank of India Act, 1934 (Act 2 of 1934), and of all powers enabling it in this behalf,
the Reserve Bank having considered it necessary in the public interest and being
satisfied that, for the purpose of enabling it to regulate the financial system to the
advantage of the country and to prevent the affairs of any Mortgage Guarantee
Company (MGC) from being conducted in a manner detrimental to the interest of
investors or in any manner prejudicial to the interest of such MGCs, hereby, issues
the following Amendment Directions.
3. These Directions shall be called the Reserve Bank of India (Mortgage Guarantee
Companies) Amendment Directions, 2026.
4. These Amendment Directions shall come into force with immediate effect.
5. These Amendment Directions modify the Master Direction as under:
(1) Paragraph 8(25) shall be replaced by:“8(25) “owned fund" means paid up equity capital, free reserves including
quarterly profits, contingency reserves maintained as per paragraph 14(a) of
these Directions, balance in share premium account, and capital reserves
representing surplus arising out of sale proceeds of asset, excluding reserves
created by revaluation of asset, as reduced by accumulated loss balance, book
value of intangible assets and deferred revenue expenditure, if any;
Inclusion of quarterly profits shall be subject to the following conditions:
(a) The financial statements shall be subjected to limited review on a quarterly
basis by the statutory auditors.
(b) Such profits shall be reduced by average dividend paid in the last three years
and the amount which can be reckoned for inclusion would be arrived at as
under:
EP = NP - 0.25 *D*t
t t
Where:
EP = Eligible profit up to quarter ‘t’ of the current financial year, t varies from 1
t
to 4
NP = Net profit up to quarter ‘t’
t
D = average dividend paid during the last three years
Losses in the current year shall be fully deducted from Owned Fund.
A MGC shall not be required to deduct a Right-of-Use (ROU) asset (created in
terms of Ind AS 116-Leases) from Owned Fund, provided the underlying asset
being taken on lease is a tangible asset.”
(2) The following paragraphs shall be inserted after sub paragraph 41(2):
“41(3) The applicable Tier 1 Capital for compliance with the norms stated in
sub-paragraphs 41(1) and 41(2) above, shall be determined based on the
MGC’s latest available financial statements (audited or subject to limited
review).
41(4) The term “Tier 1 Capital” in this context shall be as defined in paragraph
8(31) of the Master Directions.”
Yours faithfully,
Sunil T S Nair
Chief General Manager
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