RBI Related-Party Lending Curbs for Banks, From April 2026
Why in the news
RBI notified wide-ranging changes to credit risk management for commercial banks, shutting the door on new loans to promoters, large shareholders and related entities.
Key facts
- Effective date: April 1, 2026.
- Barred borrowers: promoters, their relatives, holders of 10% or more equity, and entities they control or significantly influence.
- Exception: non-strategic institutional holdings with no control or influence.
- Legacy loans: run to maturity, but any change in terms triggers full compliance.
- Penalties: fines, higher provisioning, forensic audits, business restrictions.
Approval thresholds
| Bank size | Loan needing board or committee nod |
|---|---|
| Large | ₹25 crore |
| Mid-sized | ₹10 crore |
| Smaller | ₹5 crore |
Objectives
- Avoid conflict of interest and connected lending.
- Improve governance and transparency, in line with global prudential standards.
- Cut the risk of evergreening, crony lending and insider abuse.
Compliance duties
- Board-approved policy with aggregate limits and sub-limits; whistleblower mechanism.
- Directors, key managerial personnel and specified employees must step back from decisions touching their own interests.
- Updated related-party list, quarterly reviews, deviations reported to Audit Committees, annual disclosure of loans to specified employees.
Scope
- Equity investments sit outside the directions; debt instruments of related parties are covered.
- Listed banks must also follow SEBI disclosure norms and RBI’s intra-group exposure limits.
- The earlier ₹5 crore monetary threshold for shareholding was dropped from the definition; nominee directors of other banks named by statutory bodies are excluded.
- Farm and allied loans to rural cooperative bank directors stay under existing statutory limits.
Exam angle
- Applicable from April 1, 2026; shareholding trigger 10%.
- Related terms: evergreening, connected lending.