RBI Seeks Stakeholders’ Comments on Draft Directions on Lending to Related Parties [Read Draft]
The development comes in pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated December 08, 2023
The Reserve Bank of India has issued the draft “Reserve Bank of India (Lending to Related Parties) Directions, 2025”, inviting public and stakeholder comments on the same in pursuance of the announcements made in the Statement on Developmental and Regulatory Policies issued on December 08, 2023.
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The draft directions provide a harmonised, principle-based framework to rationalise provisions and to bring uniformity across all regulated entities regarding lending to related parties, curbing connected lending and ensuring arm’s-length transactions.
At its core, the draft directions proposes several practical safeguards and governance requirements including the introduction of scale-based materiality thresholds beyond which lending to related parties will require approval of the Board or a designated committee; exclusion of independent directors of other banks from the scope of “related persons” for the purposes of these Directions; a principle-based exemption from Section 20(1)(b) of the Banking Regulation Act, 1949 for certain types of loans; and enhanced supervisory reporting and disclosure obligations for REs on transactions with related parties.
These measures are slated to create a uniform baseline across commercial banks, small finance banks, regional rural banks, local area banks, urban and rural co-operative banks, non-banking financial companies and all-India financial institutions with increased oversight from the Board.
Stakeholders have been invited by to review and provide their comments on the following proposed Directions:
1) Reserve Bank of India (Commercial Banks – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4739)
2) Reserve Bank of India (Small Finance Banks – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4740)
3) Reserve Bank of India (Regional Rural Banks – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4741)
4) Reserve Bank of India (Local Area Banks – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4742)
5) Reserve Bank of India (Urban Co-operative Banks – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4743)
6) Reserve Bank of India (Rural Co-operative Banks – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4744)
7) Reserve Bank of India (Non-Banking Financial Companies – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4745)
8) Reserve Bank of India (All India Financial Institutions – Lending to Related Parties) Directions, 2025 (https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4746).
Stakeholders may submit their comments via the ‘Connect2Regulate’ section of the Reserve Bank website or by emailing feedbackcrg@rbi.org.in.
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