RBI Unveils Revised Related-Party Lending Rules
The Reserve Bank of India (RBI) has issued a draft framework amending norms for lending by banks and NBFCs to related parties. Under the new proposal, only loans beyond certain scale-based thresholds will require board or committee approval.
Scale-Based Thresholds
Smaller banks with assets below ₹1,000 billion would need board approval only for related-party loans exceeding ₹50 million. Banks with assets between ₹1,000 billion and ₹10,000 billion would trigger review at ₹100 million, while very large banks would have a threshold of ₹500 million.
Clarifications in Rules
The draft also clarifies that independent directors from other banks would not be considered related parties for this purpose. It seeks stronger disclosure and supervisory reporting for all such transactions to enhance transparency.
Objective of Change
This change is intended to simplify and rationalise lending operations, removing blanket restrictions and focusing scrutiny only on significant related-party exposure.
Next Steps
The RBI is inviting public comment on the draft before finalising the norms.
