RBI Issues Draft Directions on Lending to Related Parties Across All Institutions
SDG 8: Decent Work & Economic Growth | SDG 16: Peace, Justice & Strong Institutions
Institutions: Reserve Bank of India | Ministry of Finance
The Reserve Bank of India (RBI) has released draft βLending to Related Parties Directions, 2025β covering every major category of regulated lender - from commercial banks and small finance banks to NBFCs, co-operative banks, regional rural banks, local area banks, and All India Financial Institutions (AIFIs). The drafts, open for public comment till Oct 31, 2025, aim to establish a uniform framework for identifying, monitoring, and limiting exposures to related parties.
In simple terms, RBI is setting limits and safeguards on how much banks and finance companies can lend to their own group companies, directors, or entities they have close ties with (related parties). Such lending can create conflicts of interest - for example, if a bank gives an easy loan to its own affiliate rather than to an ordinary borrower. The draft directions aim to make these transactions transparent, capped, and properly disclosed, so that trust in the financial system is maintained and all borrowers are treated fairly.
By harmonising rules across banks, NBFCs, and AIFIs, RBI is signalling its intent to build a consistent regulatory perimeter, curb regulatory arbitrage, and strengthen governance in credit markets. This step also aligns Indian regulation with global standards on related-party transactions under Basel and IFRS norms.
Follow the full update here: RBI PR 61365