Mumbai: The RBI on Friday released a draft framework aimed at ensuring prudence while providing operational flexibility for banks lending to related parties. The draft, titled ‘RBI (Lending to Related Parties) Directions, 2025’, seeks to establish a harmonised, principle-based approach for regulated entities.
Under the proposal, scale-based materiality thresholds will determine when board or committee approval is required. Banks with assets above Rs 10 lakh crore would need board approval for loans exceeding Rs 50 crore, those with assets between Rs 1 lakh crore and Rs 10 lakh crore for loans above Rs 10 crore, and banks under Rs 1 lakh crore for loans over Rs 5 crore. The RBI has invited comments by October 31, 2025.
It noted that lending to parties related or connected to banks—through ownership or influence over lending decisions—can harm the bank and stakeholders.
Existing statutory and regulatory restrictions, including those under the Banking Regulation Act, 1949, cover directors, their relatives, senior officers, and associated entities. The draft directions aim to comprehensively update & harmonise regulations, addressing potential conflicts of inter-est, moral hazard, and other risks linked to related-party lending.