File photo: A woman walks along the Logo of Reserve Bank of India (RBI) in the head office in Mumbai, India, April 6, 2023. Reuters/Francis Mascarenhas/File photo | Photocredit: Francis Mascarenhas
The Reserve Bank of India is planning to introduce materiality thresholds for lenders based on scale, above which the lending to their accompanying parties needs approval of their administration or commission.
The aforementioned proposal is part of a draft regulating framework on loans to related parties by various regulated entities (RES).
The materiality -based materiality is proposed to be introduced as loans to counterparties related to or connected to the credit bank, either by ownership of the bank or by their ability to control and influence the credit decisions, can be harmful to the interests of the bank and other interested parties.
Loans of related parties, including personal loans to directors, are subject to a materiality threshold, according to the draft circular.
In the case of planned commercial banks (SCBs), small financial banks (SFBS), regional national banks (RRBs) and all financial institutions in India (AIFIS) will be subject to related parties to ceilings based on their capacity size – less than £ 1 lakh crore (£ Materialitystreshold: Ceilond -Cond -Ca -Cala -Ca -Condomation; larger than/ equal to £ 1 lakh crore and a maximum of £ 10 lakh crore (£ 10 crore); and more than £ 10 lakh crore (£ 50 crore).
Depending on the category of NBFC, the loans to related parties will be subject to ceilings: Basic layer (£ 1 crore); Middle layer (£ 5 crore) and upper and upper layers (£ 10 crore).
In the case of urban cooperative banks (UCBS), borrowing related parties will be subject to ceilings: Tier 1 (£ 1 crore); Tier 2 (£ 2 crore), Tier 3 (£ 5 crore) and Tier 4 (£ 10 crore).
In the case of local banks, the loans to related parties cannot exceed £ 1 crore.
The draft circular prescribes exclusion of independent directors of other banks from the scope of ‘related persons’ of a re. In addition, the suitable supervisory reporting and disclosure requirements requires RES for transactions with related parties.
On October 31, 2025, the Central Bank invited comments on the design instructions of the instructions of the public/stakeholders.
Published on October 3, 2025
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