RBI Tightens Related Party Lending Norms for Banks

The Reserve Bank of India (RBI) has made new rules to make sure banks are careful when lending money to people or companies they are connected to, like their directors or big shareholders.

These rules say that the bank's board, not just the managers, must approve such loans.

The rules also make it clear who these 'connected people' are, including employees two levels below the board.

Banks must now report these loans more openly and check them regularly to prevent any unfair or risky lending.

The RBI wants to make sure that banks don't lend too much money to these connected parties, as it could cause problems for the bank and the whole financial system.

The new rules also say that people involved in these loans must step back from making decisions about them.

The RBI and another regulator, SEBI, have different rules, but banks must follow both to keep things fair and safe.