Archive · 5 Jan 2026
RBI updates credit risk policies
The Reserve Bank of India (RBI) has updated its rules for banks and non-bank financial companies (NBFCs).
Banks must now create a policy for managing credit risks, including loans to related parties.
They need to set limits for these loans, form a committee to oversee them, and have a system for employees to report any problems.
The RBI also met with NBFC leaders to discuss maintaining good lending practices and monitoring the quality of their loans.
These changes aim to ensure that banks and NBFCs lend money responsibly and keep their customers' interests in mind.
RBI directed banks to create a Board-approved credit risk management policy covering related party lending, country risk, and unhedged foreign currency exposures.
Banks must set aggregate limits for loans to related parties, establish a 'Committee on Lending to Related Parties,' and implement a whistleblowing mechanism.
Materiality threshold ceilings (MTC) for loans to related parties range from ₹5 crore to ₹25 crore, depending on the bank's asset size.
Directors and key personnel must recuse themselves from decisions involving their own or related parties' loans.
RBI met with NBFC leaders to emphasize sound underwriting standards, asset quality monitoring, and responsible lending practices.
- Who
- Reserve Bank of India (RBI)
- What
- Updated credit risk management policies for banks and non-bank financiers
- When
- Changes announced on January 5, 2026, effective April 1, 2026
- Where
- India
- Why
- To enhance underwriting standards, monitor asset quality, and manage related party transactions
- Regulator
- Reserve Bank of India (RBI)
- Policy Effective Date
- April 1, 2026
- Materiality Threshold Ceiling (MTC)
- ₹5 crore to ₹25 crore (depending on bank asset size)
- Committee Requirement
- Committee on Lending to Related Parties
- Whistleblowing Mechanism
- Encourages reporting of irregular loans
- Meeting Date
- January 5, 2026
- NBFC Sector Representation
- 53% of total NBFC sector assets
Sources
Related party rules: RBI accepts some industry suggestions, rejects others
RBI asks banks to draw up credit risk management policy, covering aspects such as lending to related parties
RBI flags underwriting, asset quality risks in meeting with NBFC chiefs
