RBI Issues Final Amendment Framework on Lending to Related Parties; Effective April 2026:

RBI Issues Final Amendment Framework on Lending to Related Parties; Effective April 2026 The Central Bank of India, RBI (Reserve Bank of India), has released final amendment directions on lending to related parties by regulated entities. This revised framework is scheduled to take effect from April 01, 2026. The action will significantly enhance the definition of related parties, related persons, control, promoters, and key managerial personnel, aligning them with the Companies Act and IBC. Using these directions, RBI has introduced significant amendments to the Reserve Bank of India (Non-Banking Financial Companies - Credit Risk Management) - Directions, 2025. The Central bank has taken this action in exercise of its powers granted under 45JA, 45L, and 45M of the Reserve Bank of India Act, 1934; Sections 30A and 32 of the National Housing Bank Act, 1987; Section 6 of the Factoring Regulation Act, 2011; and all other provisions/laws.

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The directions aim to make the rules for lending by regulated entities (REs) like banks, NBFCs, cooperative banks, and national financial institutions clearer, more consistent, and easier to adhere to. In the revised framework, RBI has excluded equity investments in related parties, despite investments in debt instruments still being covered. NBFCs that do not accept government funds and do not possess a customer interface, as well as Core Investment Companies that largely lend within their group, have been exempted by the RBI.

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No amendments have been introduced to the existing prohibitions on lending by all-India financial institutions to directors and related entities. The amended framework has substituted the term “senior officer” with “specified employee,” and the word “substantial interest” has been replaced with “significant influence and control.”