154MD.jsonl

{"text": "Introduction \nReserve Bank of India (Reserve Bank) is statutorily mandated to operate the credit \nsystem of the country to its advantage. In pursuit of this mandate, the Reserve Bank \nencourages innovation in the financial systems, credit products and delivery \nmechanisms while ensuring orderly growth, financial stability and the protection of \ndepositors’ and borrowers’ interest. With the progressive deregulation of bank credit, \nprudential norms primarily serve as regulatory safeguards. These norms, issued from \ntime to time, provide guidance to regulated entities (REs) on the design and delivery \nof credit-related products and services. These Directions consolidate the instructions \nissued to commercial banks on credit facilities. \nAccordingly, in exercise of powers conferred by Sections 21, and 35A of the Banking \nRegulation Act, 1949, the Reserve Bank being satisfied that it is necessary and \nexpedient in the public interest so to do, hereby issues these Directions hereinafter \nspecified. \nChapter I -  Preliminary \nA. Short Title and Commencement  \n1. These Directions shall be called the Reserve Bank of India (Commercial Banks – \nCredit Facilities) Directions, 2025. \n2. These Directions shall come into effect immediately upon its issuance, unless \nindicated otherwise.  \nB. Applicability \n3. These Directions shall be applicable to Commercial Banks (hereinafter collectively \nreferred to as 'banks' and individually as a 'bank'). \nFor the purpose of these Directions, ‘Commercial Banks’ means banking \ncompanies (other than Small Finance Banks, Payment Banks, and Local Area \nBanks), corresponding new banks, and the State Bank of India, as defined \nrespectively under clauses (c), (da), and (nc) of Section 5 of the Banking \nRegulation Act, 1949."}
{"text": "C. Definitions \n4.  \n(1) For the purpose of these Directions, following definitions shall apply: \n1[(ia) ‘Acquisition Finance’ shall mean a financial facility or assistance provided \nto an eligible borrower entity for the purpose of acquiring control in a target \ncompany (including through a scheme of amalgamation or merger). Such \nfunding may also involve refinancing of existing debt of the target company \nif the refinancing is integral to the acquisition finance.] \n2[(ib)] ‘Actual Date of Commencement of Commercial Operations (actual DCCO)’ \nmeans the date on which the project is put to commercial use and \ncompletion certificate / provisional completion certificate / occupancy \ncertificate (in case of CRE and CRE-RH projects) or its equivalent is issued \nto the concessionaire / project developer / promoter. \n(ii) ‘Annual Percentage Rate’ (APR) means APR as defined under Reserve \nBank of India (Commercial Banks - Responsible Business Conduct) \nDirections, 2025.  \n(iii) ‘Appointed Date’ means the date, as defined in the concession agreement \nentered into between the concessionaire and the concession granting \nauthority, on which the concession agreement comes into force in \naccordance with the terms outlined therein (applicable only in the case of \ninfrastructure projects under Public Private Partnership (PPP) model). \n(iv) ‘Beneficiary’ means the party in whose favour the NFB facility is issued by \nthe bank. \n3[(iva) ‘Bridge Finance’ shall mean financing a borrower for an interim period, not \nexceeding one year, for a legitimate business purpose where the borrower \nhas a firm plan and capability to repay such loans by raising financial \n \n1   Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n2 Renumbered with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n3 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "resources either through issuance of equity, debt or hybrid instruments or \nby divestiture/hive-off of a part of existing business/assets within the \ninterim period.] \n(v) ‘Bullet Repayment Loans’ means loans where both principal and interest \nare due for payment at the maturity of the loan. \n4[(va) ‘Capital Market Intermediaries (CMIs)’ shall mean regulated entities \nundertaking trade execution and market infrastructure services in capital \nmarkets, including broking, clearing, custody, market making or other \nincidental services. \nProvided that CMIs shall not include Standalone Primary Dealers and \nQualified Central Counterparty (QCCPs).] \n (vb) ‘Cash and cash equivalents’ shall include cash, balances held in demand \nand term deposits placed with the lending bank and investments in units of \novernight mutual funds (with a minimum haircut of 10 per cent).] \n(vi) ‘Co-acceptance of bills’ means an undertaking to make payment to the \ndrawer of the bill (seller / exporter) on due date if the buyer / importer fails \nto make the payment on that date. \n(vii) 5[‘Collateral Security’ or ‘Collateral’ means an asset on which a security \ncharge is created in favour of the lender for securing a credit facility.] \n(viii) ‘Consumption Loan’ means any permissible loan that does not fit the \ndefinition of ‘income generating loan’ as defined subsequently. \n6[(viiia) ‘Control’ shall have the same meaning as defined in Section 2(27) of the \nCompanies Act, 2013.] \n(ix) ‘Credit Event’ in the context of project finance exposures, shall be deemed \nto have been triggered on the occurrence of any of the following: \n(a) Default with any lender. \n \n4 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n5 Substituted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n6 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "(b) Any lender(s) determines a need for extension of the original / extended \nDCCO, as the case may be, of the project. \n(c) Expiry of original / extended DCCO, as the case may be. \n(d) Any lender(s) determines a need for infusion of additional debt. \n(e) The project is faced with financial difficulty as determined under the \nReserve Bank of India (Commercial Banks – Resolution of Stressed \nAssets) Directions, 2025. \n(x) ‘Default Loss Guarantee (DLG)’ means a contractual arrangement, called \nby whatever name, between the bank and another entity, under which the \nlatter guarantees to compensate the bank, for the loss due to default up to \na certain percentage of the loan portfolio of the bank, specified upfront. Any \nother implicit guarantee of similar nature, linked to the performance of the \nloan portfolio of the bank and specified upfront, shall also be covered under \nthe definition of DLG.  \n(xi) ‘Digital Lending’ means a remote and automated lending process, largely \nby use of seamless digital technologies for customer acquisition, credit \nassessment, loan approval, disbursement, recovery, and associated \ncustomer service.  \n(xii) ‘Digital Lending Apps / Platforms’ (DLAs) means a mobile and / or web-\nbased applications, on a standalone basis or as a part of suite of functions \nof an application with user interface that facilitate digital lending services. \nDLAs shall include applications of the bank as well as those operated by \nLending Service Provider (LSP) engaged by bank for extending any credit \nfacilitation services in conformity with extant outsourcing guidelines issued \nby the Reserve Bank.  \n(xiii) ‘Date of Financial Closure’ means the date on which the capital structure \nof the project, including equity, debt, grant (only in the case of infrastructure \nPPP projects) (if any), accounting for minimum 90 per cent of total project \ncost, becomes legally binding on all stakeholders. \nExplanation: In the case of CRE-RH projects, lenders may reckon \ncontingent sales receivables (if any) as part of promoters’ contribution to \nthe project."}
{"text": "(xiv) ‘Default’ means the non-payment of debt (as defined in Insolvency and \nBankruptcy Code (IBC), 2016) when whole or any part or instalment of the \ndebt has become due and payable and is not paid by the debtor. \n7[(xiva) ‘Eligible Securities’ shall include the following securities: \n(a) Listed Group-1 equity shares and preference shares; \nExplanation: Group 1 securities as defined under instructions issued by \nSecurities and Exchange Board of India (SEBI)  \n(b) Government Securities, including Treasury Bills and Sovereign Gold \nBonds;  \n(c) Listed Debt Securities, including Convertible Debt Securities, rated \nBBB or higher;  \nExplanation: Debt securities as defined under Section 2(1)(k) of the \nSEBI (Issue and Listing of Non-Convertible Securities) Regulations, \n2021 dated August 9, 2021, as updated from time to time. \n(d) Units of Mutual Fund Schemes which are listed or where \nrepurchase/redemption facility is available for such units through the \nAsset Management Company, with underlying investments in equity, \nequity related instruments or debt instruments.  \n(e) Units of Exchange Traded Funds (excluding gold, silver and any other \ncommodity ETFs) \n(f) Units of Real Estate Investment Trusts (REITs) and Infrastructure \nInvestment Trusts (InvITs).] \n(xv) ‘Extended DCCO’: If the original DCCO is revised, then the revised DCCO \nshall be termed as the Extended DCCO. \n8[(xva) ’Gold Metal Loans’ (GML) mean loans extended by eligible banks to \nspecified borrowers in the form of gold metal. \n(a) ’GMS-linked GML’ means GML extended by designated banks under the \nGold Monetization Scheme, 2015 (GMS), utilising – (i) the gold deposit \n \n7 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n8 Inserted with effect from April 01, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities) \nAmendment Directions, 2025 dated December 4, 2025."}
{"text": "accepted by them as Short Term Bank Deposit under the GMS, or (ii) gold \nborrowed from other designated banks under GMS, and where the \nrepayment can be either in gold or in cash or in a combination of both. \n(b) ’Import-linked GML’ means GML extended by nominated banks \nauthorized to import gold, where the source of gold metal lent is gold \nimported by them, and where repayment has to be necessarily in cash.] \n(xvi) ‘Guarantee’ means a contract to perform the promise, or discharge the \nliability, of a third person in the contingent case of his non-performance or \ndefault, in terms of The Indian Contract Act, 1872. \n(xvii) ‘Guarantor’ means the party which issues the guarantee. \n(xviii) ‘Income Generating Loan’ means loans extended for the purpose of \nproductive economic activities, such as farm credit, loans for business or \ncommercial purposes, loans for creation or acquisition of productive assets \netc. \n(xix) ‘Infrastructure Sector’ shall include the sub-sectors included in the \nHarmonised Master List of Infrastructure sub-sectors issued by the \nDepartment of Economic Affairs, Ministry of Finance, Government of India. \n(xx) ‘Interest During Construction’ (IDC) means the interest accrued on debt \nprovided by a lender and capitalised during the construction phase of the \nproject. \n(xxi) ‘Jewellery’ means items that are designed to be worn as personal \nadornments. \n(xxii) ‘Lending Service Provider’ (LSP) means an agent of the bank (including \nanother bank) who carries out one or more of bank’s digital lending \nfunctions, or part thereof, in customer acquisition, services incidental to \nunderwriting and pricing, servicing, monitoring, recovery of specific loan or \nloan portfolio on behalf of the bank in conformity with extant outsourcing \nguidelines issued by the Reserve Bank. \nProvided that, while entities offering only Payment Aggregator (PA) \nservices in terms of the extant instructions issued by the Reserve Bank \nshall remain out of the ambit of these Directions, any PA also performing \nthe role of an LSP shall comply with Chapter III of these Directions."}
{"text": "9[(xxiia) ‘Loan to Value (LTV)’ shall mean the ratio of the outstanding loan amount \nto the value of the securities as on any given day. \n(xxiib) ‘Margin’ shall mean the contribution of the borrower, either in the form of \ncash or other liquid assets, for the purpose of purchasing or borrowing a \nsecurity with bank finance or obtaining a non-fund-based facility from bank. \n(xxiic) ‘Non-financial company’ shall mean an entity not primarily engaged in \nundertaking financial activities, and in the context of domestic entities, shall \nrefer to a non-banking institution which is a company but not included in \nthe definition of a ‘financial institution’ or a ‘non-banking financial company’ \nas per the RBI Act, 1934.] \n(xxiii) ‘Normal transit period’ means the average period normally involved from \nthe date of negotiation / purchase / discount till the receipt of bill proceeds \nin the Nostro account of the bank concerned, as prescribed by FEDAI from \ntime to time.  \nExplanation: It is clarified that it is not the time taken for the arrival of goods \nat overseas destination. \n(xxiv) ‘Obligor’ in the context of Chapter XVI of these Directions means a party \nagainst whose obligations, financial or otherwise, a NFB facility has been \nissued. In the case of guarantees, the obligor may also be termed as \n‘principal debtor’, as defined under the Indian Contract Act, 1872. \n(xxv) ‘Original DCCO’ means the date, as envisaged at the time of financial \nclosure, by which the project is expected to be put to commercial use and \ncompletion certificate / provisional completion certificate, or its equivalent, \nis expected to be issued to the concessionaire / project developer / \npromoter. \nProvided that, in the case of CRE and CRE-RH projects, original DCCO \nshall be the date on which Occupancy Certificate, or its equivalent, is \nexpected to be obtained from the competent authority. \n \n9Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "(xxvi) ‘Ornaments’ means items meant for use as adornment of any object, \ndecorative items, or utensils, excluding those items that fall under the \ndefinition of jewellery as defined previously. \n(xxvii) ‘Overdue bill’ in the case of a demand bill means a bill which is not paid \nbefore the expiry of the normal transit period, plus grace period. In the case \nof a usance bill, it refers to a bill which is not paid on the due date. \n(xxviii) ‘Post-shipment Credit’ means any loan or advance granted or any other \ncredit provided by the bank to an exporter of goods / services from India \nfrom the date of extending credit after shipment of goods / rendering of \nservices to the date of realisation of export proceeds, and includes any loan \nor advance granted to an exporter, in consideration of, or on the security \nof any duty drawback allowed by the Government from time to time. \n(xxix) ‘Pre-shipment’ / ‘Packing Credit’ means any loan or advance granted or \nany other credit provided by the bank to an exporter for financing the \npurchase, processing, manufacturing or packing of goods prior to shipment \n/ working capital expenses towards rendering of services on the basis of \nletter of credit opened in his favour or in favour of some other person, by \nan overseas buyer or a confirmed and irrevocable order for the export of \ngoods / services from India or any other evidence of an order for export \nfrom India having been placed on the exporter or some other person, \nunless lodgement of export orders or letter of credit with the bank has been \nwaived. \n(xxx) ‘Primary Gold’ and ‘Primary Silver’ means gold and silver in any form \nother than in the form of a jewellery, ornaments and coins. \n10[(xxxa) ‘Primary Security’ shall mean security created on assets which have \nbeen financed out of the credit facility extended to the borrower.] \n(xxxi) ‘Project’ in the context of Chapter VII of these Directions means a \nventure undertaken through capital expenditure (involving current and \nfuture outlay of funds) for creation / expansion / upgradation of tangible \nassets and / or facilities in the expectation of stream of cash flow benefits \n \n10 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit \nFacilities) Amendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "extending far into the future. Projects usually have the characteristics of a \nlong gestation period, irreversibility and substantial capital outlays. \n(xxxii) ‘Project Finance’ in the context of Chapter VII of these Directions refers \nto the method of funding a project in which the revenues to be generated \nby the funded project serve as the primary security for the loan, and also \nas a source of repayment. Project finance may take the form of financing \nthe construction of a new capital installation (greenfield), or financing an \nimprovement / enhancement in the existing installation (brownfield). For \nthe purpose of these Directions, an exposure shall qualify as a project \nfinance exposure only if the following conditions are satisfied: \n(a) The pre-dominant source of repayment as envisaged at the time of \nfinancial closure (i.e., at least 51 per cent) must be from cash flows \narising from the project which is being financed. \n(b) All the lenders have a common agreement with the debtor. \nExplanation: A common agreement may have different loan terms \n(except original / extended / actual DCCO as specified in paragraph 76 \nof these Directions) for each of the lender provided the same has been \nagreed upon by the debtor and all the lender(s) to the project. \n(xxxiii) ‘Restructuring’ shall have the same meaning as specified under \nReserve Bank of India (Commercial Banks - Resolution of Stressed \nAssets), Directions, 2025. \n(xxxiv) ‘Resolution Plan’ (RP) shall have the same meaning as specified under \nReserve Bank of India (Commercial Banks – Resolution of Stressed \nAssets) Directions, 2025 \n(xxxv) ‘Secured portion of an NFB facility’ means the portion of the facility \ncovered by realisable value of tangible security/ collateral estimated on a \nrealistic basis. \n(xxxvi) ‘Top-up Loan’ in the context of Chapter IV of these Directions means \nan additional loan sanctioned over and above an outstanding loan, during \nthe tenor of the original loan, based on the strength of the collateral already \npledged for the existing loan. \n(2) All other expressions unless defined herein shall have the same meanings as \nhave been assigned to them under the Banking Regulation Act, 1949 or the"}
{"text": "Reserve Bank of India Act, 1934, or any statutory modification or re-enactment \nthereto or in other relevant directions issued by the Reserve Bank or as used \nin commercial parlance, as the case may be."}
{"text": "Chapter II - Role of The Board \n5. A bank shall put in place a Board-approved credit policy covering, inter alia, the \nareas specified below, to the extent such activities are undertaken by it. The \nspecific aspects to be addressed in such a policy are detailed in the relevant \nparagraphs of these Directions. \n(1) Digital Lending including DLG \n(2) Lending Against Gold and Silver Collateral \n(3) Gold Metal Loans \n(4) Microfinance Loans  \n(5) Project Finance \n(6) 11[Credit Facilities to Real Estate Sector, including Housing Finance] \n(7) Finance to NBFCs \n(8) Issue of Non-Fund Based Credit Facilities like guarantee, letter of credit, co-\nacceptance, partial credit enhancement. \n(9) Discounting / Rediscounting of Bills \n(10) Export Credit \n(11) 12[Loan Against Financial Assets including eligible securities] \n(12) Credit Facilities to Overseas Joint Ventures (JV) \n(13) 13[Bridge Finance] \n(14) Exposure to Infrastructure Investment Trusts (InvITs)  \n14[(15) Acquisition Finance, including financing extended by overseas branches of \nIndian banks. \n(16) Credit Facilities to Capital Market Intermediaries (CMIs)] \n \n \n11 Modified with effect from July 01, 2026 \n12 Substituted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n13 Substituted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n14 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "15[ \nChapter IIA: Credit Facilities Linked to Specific Payment Instruments \n5A. Notwithstanding the mode / channel of credit delivery or the type of payment \ninstrument and / or underlying technology used for its disbursement, the \nprudential treatment of an underlying credit facility, including pre-sanctioned \ncredit lines meant for payment transactions through UPI, shall be solely \ndetermined by the nature of the underlying credit facility, governed in terms of \nthe applicable prudential norms.   \n5B. Any credit facility which is designed to be linked to a specific payment mode, shall \nhave its terms and conditions included in the bank’s credit policy and shall \ncomply with all other applicable regulatory requirements. \nExplanation – For avoidance of any doubt, it is clarified that only such credit \nfacilities as are otherwise permitted to be sanctioned by a bank under the extant \nregulations, can be offered as part of any such arrangement.    \n5C. The above instructions shall be without derogation to the provisions of any other \nlaw or regulation in relation to transactions effected through any payment \nmechanism.] \n \n \n \n \n15 Inserted with effect from June 23, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities) Fourth \nAmendment Directions, 2026 dated June 23, 2026."}
{"text": "Chapter III - Digital Lending Guidelines \nA. General Requirements for bank-LSP Arrangements \n6. Due diligence requirements with respect to LSPs \n(1) Digital lending by a bank involving a LSP, shall be carried out under a \ncontractual agreement between the bank and the LSP, which clearly defines \nthe respective roles, rights, and obligations of each party thereto. \n(2) A bank shall conduct enhanced due diligence before they enter into an \nagreement with a LSP for digital lending, taking into account LSP’s technical \ncapabilities, robustness of data privacy policies and storage systems, fairness \nin conduct with borrowers, past records of conduct and ability to comply with \nall applicable regulations and statutes. \n(3) A bank shall carry out periodic review of the conduct of the LSP vis-à-vis the \nterms of the contractual agreement and shall take appropriate action in the \nevent of any deviation therefrom. \n(4) A bank shall lay down, as part of its policy, suitable monitoring mechanisms for \nthe loan portfolios originated with the support of LSPs.  \n(5) A bank shall impart necessary guidance to LSP acting as a recovery agent, to \ndischarge their duties responsibly and ensure that LSP complies with the \napplicable instructions in Reserve Bank of India (Commercial Banks – \nResponsible Business Conduct) Directions, 2025. \n(6) A bank shall continue to conform to the extant guidelines on outsourcing as \ndetailed in Reserve Bank of India (Commercial Banks – Managing Risks in \nOutsourcing) Directions, 2025 and shall ensure that the LSPs engaged by it \nand the DLAs (either of the bank or of the LSPs engaged by the bank) comply \nwith these Directions.  \n(7) As an overarching principle, any outsourcing agreement entered into by a bank \nwith an LSP shall in no manner dilute or absolve the bank of its obligations \nunder any statutory or regulatory provision, and the bank shall remain fully \nresponsible and liable for all acts and omissions of the LSP. \n7. Bank-LSP arrangements involving multiple lenders \nIn cases where an LSP has agreements with multiple lenders for digital lending, \neach lender shall ensure the following:"}
{"text": "(1) An LSP shall provide a digital view of all the loan offers matching the borrower’s \nrequest on the DLA which meets the requirement of the borrower. The name \nof the unmatched lenders shall also be disclosed in the digital view. \n(2) While the LSP may adopt any mechanism to match the request of borrowers \nwith the lender(s) to offer a loan, it shall follow a consistent approach for \nsimilarly placed borrowers and products. The mechanism adopted by the LSP \nand any subsequent changes to this mechanism shall be properly \ndocumented. \n(3) The digital view of loan offers from matching lenders shall include the name(s) \nof the lender(s) extending the loan offer, amount and tenor of loan, APR, \nmonthly repayment obligation and penal charges (if applicable), in a way which \nenables the borrower to make a fair comparison between various offers. A link \nto the KFS shall also be provided in respect of each of the lender. \n(4) The content displayed by the LSP shall be unbiased, objective and shall not \ndirectly / indirectly promote or push a product of a particular lender, including \nthe use of dark patterns / deceptive patterns designed to mislead borrowers \ninto choosing a particular loan offer. However, ranking of loan offers based on \na publicly pre-disclosed metric for such ranking shall not be construed as \npromoting a particular product. \nExplanation: Dark patterns shall have the same meaning as defined under \nsection 2(e) of the ‘Guidelines for Prevention and Regulation of Dark Patterns, \n2023’ dated November 30, 2023, issued by Central Consumer Protection \nAuthority, and as amended from time to time. \nB. Conduct and Customer Protection Requirements \n8. Assessing the borrower’s creditworthiness  \n(1) A bank shall obtain the necessary information relating to economic profile of \nthe borrower with a view to assessing the borrower’s creditworthiness before \nextending any loan, including, at a minimum, age, occupation and income \ndetails. The same shall be kept on record for audit purposes. \n(2) A bank shall ensure that there is no automatic increase in credit limit unless an \nexplicit request is received, evaluated and kept on record from the borrower \nfor such increase."}
{"text": "9. Disclosures to borrowers \n(1) A bank shall provide a Key Fact Statement (KFS), as per instructions contained \nin Reserve Bank of India (Commercial Banks - Responsible Business \nConduct), Directions, 2025. \n(2) As regards penal charges, a bank shall be guided by Reserve Bank of India \n(Commercial Banks - Responsible Business Conduct), Directions, 2025. \n(3) A bank shall ensure that digitally signed documents (on the letter head of the \nbank) viz., KFS, summary of loan product, sanction letter, terms and \nconditions, account statements, privacy policies of the bank / LSP with respect \nto storage and usage of borrowers’ data, etc. shall automatically flow to the \nborrower on the registered and verified email / SMS upon execution of the loan \ncontract / transactions. \nExplanation: Digitally signed documents shall be in compliance with the \nprovisions of the Information Technology Act, 2000, as amended from time to \ntime. \n(4) The bank shall maintain a website of their own in public domain, which shall be \nkept up to date, inter-alia, with the following details at a prominent single place \non the website for ease of accessibility: \n(i) Details of all of its digital lending products and its DLAs. \n(ii) Details of LSPs and the DLAs of the LSPs along with the details of the \nactivities for which they have been engaged for. \n(iii) Particulars of bank’s customer care and internal grievance redressal \nmechanism. \n(iv) Link to the Reserve Bank’s Complaint Management System (CMS) and \nSachet Portal. \n(v) Privacy policies and other details as required under extant guidelines of the \nReserve Bank. \n(5) A bank shall ensure that DLAs / LSPs have links to the above website of the \nbank. \n(6) In case of a loan default, when a recovery agent is assigned for recovery or \nthere is a change in the recovery agent already assigned, the particulars of \nsuch recovery agent authorised to approach the borrower for recovery shall be"}
{"text": "communicated to the borrower through email / SMS before the recovery agent \ncontacts the borrower for recovery.  \n10.  Loan disbursal, servicing, and repayment \n(1) Disbursement of loan by a bank shall always be made into the bank account of \nthe borrower except for disbursals covered exclusively under statutory or \nregulatory mandate (of the Reserve Bank or of any other regulator), flow of \nmoney between lenders for co-lending transactions and disbursals for specific \nend use, provided the loan is disbursed directly into the bank account of the \nend-beneficiary. The bank shall ensure that in no case, disbursal is made to a \nthird-party account, including the accounts of LSP, except as provided in this \nChapter.  \nProvided that, advances against salary, where the loan is disbursed directly to \nthe bank account of the borrower, but the repayment is from the corporate \nemployer, can be allowed subject to the condition that the loan is repaid by the \ncorporate employer by deducting the amount from the borrower’s salary. \nHowever, it must be ensured that LSPs do not have any control over the flow \nof funds directly or indirectly in such transactions and that repayment is directly \nfrom the bank account of the employer to the bank. \nExplanation: Co-lending arrangements shall be governed by the Reserve Bank \nof India (Commercial Banks – Transfer and Distribution of Credit Risk) \nDirections, 2025, subject to the condition that no third party other than the \nlenders in a co-lending transaction shall have direct or indirect control over the \nflow of funds at any point of time. \n(2) A bank shall ensure that all loan servicing, repayment, etc. is executed by the \nborrower directly in the bank’s account without any pass-through account / pool \naccount of any third party, including the accounts of LSP. \n(3) The flow of funds between the bank accounts of the borrower and the bank \nshall not be controlled either directly or indirectly by a third-party, including the \nLSP. \n(4) A bank shall ensure that any fees, charges, reimbursements, etc. payable to \nLSP are paid directly by the bank and are not charged to or collected from the \nborrowers separately by LSP."}
{"text": "(5) In case of delinquent loans, a bank may deploy physical interface to recover \nloans in cash, wherever necessary. In order to afford operational flexibility to \nthe bank, such transactions are exempted from the requirement of direct \nrepayment of loan in the bank’s account. However, any recovery by cash shall \nbe duly reflected in full in the borrower’s account on the same day and the bank \nshall ensure that any fees, charges, etc., payable to LSPs for such recovery \nare paid directly by the bank and are not charged by LSP to the borrower either \ndirectly or indirectly from the recovery proceeds. \n11. Cooling-off period \n(1) The borrower shall be given an explicit option to exit a digital loan by paying \nthe principal and the proportionate APR without any penalty during an initial \n“cooling-off period”. The cooling off period shall be determined by the bank in \nterms of its credit policy, subject to the period so determined not being less \nthan one day. For borrower continuing with the loan even after cooling-off \nperiod, pre-payment shall continue to be allowed as per the Reserve Bank of \nIndia (Commercial Banks - Responsible Business Conduct) Directions, 2025. \n(2) The bank may retain a reasonable one-time processing fee, if the customer \nexits the loan during the cooling-off period. This, if applicable, shall be \ndisclosed to the customer upfront in KFS. \n12. Grievance redressal  \n(1) A bank, and its LSP which has an interface with the borrower, shall designate \nnodal grievance redressal officers to deal with digital lending related \ncomplaints / issues raised by the borrower.  \n(2) Contact details of the nodal grievance redressal officers shall be prominently \ndisplayed on the websites of the bank, its LSP and on the DLA, as well as in \nthe KFS provided to the borrower.  \n(3) The facility of lodging complaint shall also be made available on the DLA and \non the website as stated above. It is reiterated that responsibility of grievance \nredressal shall continue to remain with the bank.  \n(4) If any complaint lodged by the borrower against the bank or the LSP engaged \nby the bank is rejected wholly or partly by the bank, or the borrower is not \nsatisfied with the reply; or the borrower has not received any reply within 30"}
{"text": "days of receipt of complaint by the bank, the said borrower can lodge a \ncomplaint \nover \nthe \nComplaint \nManagement \nSystem \n(CMS \n- \nhttps://cms.rbi.org.in/) portal under the Reserve Bank-Integrated Ombudsman \nScheme \n(RB-IOS \n- \nIssued \nvide \nNotification \nCEPD. \nPRD. \nNo.S873/13.01.001/2021-22 dated November 12, 2021) or send a physical \ncomplaint to “Centralised Receipt and Processing Centre, 4th Floor, Reserve \nBank of India, Sector -17, Central Vista, Chandigarh - 160017” as per the \ngrievance redressal mechanism prescribed by the Reserve Bank. This \ninformation shall be suitably conveyed to the borrower. \nC. Technology and Data Requirement \n13. Collection, usage and sharing of data with third parties \n(1) A bank shall ensure that any collection of data by its DLA and DLA of its LSP \nis need-based and with prior and explicit consent of the borrower having audit \ntrail. In any case, the bank shall also ensure that DLA of the bank / LSP desist \nfrom accessing mobile phone resources like file and media, contact list, call \nlogs, telephony functions, etc. A one-time access can be taken for camera, \nmicrophone, location or any other facility necessary for the purpose of on-\nboarding / KYC requirements only, with the explicit consent of the borrower. \n(2) The borrower shall be provided with an option to give or deny consent for use \nof specific data, restrict disclosure to third parties, data retention, revoke \nconsent already granted to collect personal data and if required, make the bank \n/ LSP delete / forget the data. \n(3) The purpose of obtaining borrowers’ consent needs to be disclosed at each \nstage of interface with the borrowers. \n(4) Explicit consent of the borrower shall be taken before sharing personal \ninformation with any third party, except for cases where such sharing is \nrequired as per statutory or regulatory requirement. \n14. Storage of data \n(1) A bank shall ensure that LSP engaged by them do not store personal \ninformation of borrower except some basic minimal data (viz., name, address, \ncontact details of the customer, etc.) that may be required to carry out their \noperations or service within the scope of the bank-LSP agreement."}
{"text": "Responsibility regarding data privacy and security of the customer’s personal \ninformation on an ongoing basis shall be that of the bank. \n(2) A bank shall ensure that clear policy guidelines regarding the storage of \ncustomer data including the type of data that can be stored, the length of time \nfor which data can be stored, restrictions on the use of data, data destruction \nprotocol, standards for handling security breach, etc., are put in place and also \ndisclosed by the bank and the LSP engaged by the bank prominently on their \nwebsite and DLA at all times.  \n(3) A bank shall ensure that no biometric data is stored / collected by them and \nLSP, unless allowed under extant statutory guidelines. \n(4) A bank shall ensure that all data is stored only in servers located within India, \nwhile ensuring compliance with statutory obligations / regulatory instructions. \nFurther, in case the data is processed outside India, the same shall be deleted \nfrom servers outside India and brought back to India within 24 hours of \nprocessing. \n15. Comprehensive privacy policy \n(1) A bank and LSPs engaged by the bank shall have a comprehensive privacy \npolicy compliant with applicable laws, associated regulations and the Reserve \nBank guidelines which shall be made available publicly on the website of the \nbank and LSP, as the case may be.  \n(2) Details of third parties (where applicable) allowed to collect personal \ninformation through the DLA shall also be disclosed in the privacy policy. \n16. Technology standards \nA bank shall ensure that they and the LSPs engaged by them comply with various \ntechnology standards / requirements on cybersecurity stipulated by the Reserve \nBank and other relevant agencies, or as may be specified from time to time, for \nundertaking digital lending.  \nD. Reporting of Credit Information and DLAs \n17. Reporting to Credit Information Companies (CICs) \n(1) As per the provisions of the Credit Information Companies (CIC) (Regulation) \nAct, 2005; CIC Rules, 2006; CIC Regulations, 2006 and related guidelines \nissued by the Reserve Bank from time to time, a bank shall ensure that any"}
{"text": "lending done through their DLAs and / or DLAs of LSPs is reported by them to \nCICs irrespective of its nature / tenor.  \n(2) Extension of structured digital lending products by a bank and / or LSPs \nengaged by the bank over a merchant platform involving short term, unsecured \n/ secured credits or deferred payments, need to be reported to CICs by the \nbank. The bank shall ensure that LSPs, if any, associated with such deferred \npayment credit products shall abide by the extant outsourcing guidelines \nissued by the Reserve Bank and be guided by the instructions contained in this \nChapter. \n18.  Reporting of DLAs to the Reserve Bank \n(1) The bank shall report all DLAs deployed / joined by them, whether their own or \nthose of the LSPs, either exclusively or as a platform participant, on the \nCentralised Information Management System (CIMS) portal of the Reserve \nBank in the requisite format as given in the Annex - I to these Directions. \n(2) The bank shall update the aforesaid list as and when additional DLA(s) are \ndeployed or the engagement with the existing DLA(s) ceases to exist by filing \nthe updated data in the CIMS portal. \n(3) The Chief Compliance Officer of the bank or any other official designated by \nthe Board of the bank for the purpose shall certify that the data on DLAs \nsubmitted by them on the CIMS portal is correct and the DLAs are compliant \nwith all the extant regulatory instructions, including the provisions of this \nChapter.  \n(4) Without prejudice to the generality of the above, the Chief Compliance Officer \n/ other official designated by the Board of the bank shall certify the following \naspects: \n(i) DLAs have link to the bank’s website where further information about the \nloan products, the lender, the LSP, particulars of customer care, link to \nSachet Portal, privacy policies, etc. can be accessed by the borrower.  \n(ii) DLAs (in case owned by LSP), have appointed a suitable nodal grievance \nredressal officer to deal with digital lending related complaints / issues \nraised by the borrower, details of which are prominently available on the \nrespective DLA."}
{"text": "(iii) Data collection and storage by DLAs is in compliance with paragraphs 13 \nand 14 of these Directions and other statutory and regulatory requirements, \nas applicable from time to time. \n(iv) The DLA’s particulars submitted by the bank are also suitably disclosed on \nthe bank’s website as required under paragraph 9(4) of these Directions. \n(5) The bank shall ensure the correctness and timeliness of information regarding \nDLAs, as the data, as submitted by the bank on CIMS, shall be published on \nthe website of the Reserve Bank in an automated manner and the Reserve \nBank shall not verify / validate the data submitted on CIMS. All issues and \ngrievances of customers concerning DLAs shall be addressed and dealt with \nby the bank directly. \n(6) The bank shall ensure that the inclusion of any third party DLAs deployed by \nthem as part of above reporting, shall not be construed by the DLAs or any \nassociated entity as conferring any form of registration, authorization, or \nendorsement by the Reserve Bank. The bank shall also ensure that such \ninclusion is not misrepresented in any marketing, promotional, or other \nmaterials issued by or on behalf of the DLAs. \nE. Loss sharing arrangement in case of default \n19. Eligibility as Default Loss Guarantee (DLG) provider \nA bank may enter into DLG arrangements only with a LSP / other lender engaged \nas an LSP. Further, the LSP providing DLG shall be incorporated as a company \nunder the Companies Act, 2013. \n20. Due diligence and other requirements with respect to DLG provider \n(1) A bank, including a bank acting as DLG provider, shall lay down, as part of its \npolicy, the eligibility criteria for DLG provider, nature and extent of DLG cover, \nprocess of monitoring and reviewing the DLG arrangement, and the details of \nthe fees, if any, payable to / received by the DLG provider, as the case may \nbe, before entering into any DLG arrangement.  \n(2) A bank shall ensure that any DLG arrangement does not act as a substitute for \ncredit appraisal requirements and robust credit underwriting standards need to \nbe put in place irrespective of the DLG cover."}
{"text": "(3) Every time a bank enters into or renews a DLG arrangement, it shall obtain \nadequate information to satisfy itself that the entity extending DLG would be \nable to honour it. Such information shall, at a minimum, include a declaration \nfrom the DLG provider, certified by the statutory auditor of the DLG provider, \non the aggregate DLG amount outstanding, the number of lenders and the \nrespective number of portfolios against which DLG has been provided. The \ndeclaration shall also contain past default rates on similar portfolios. \n(4) It is clarified that the due-diligence requirements specified herein are in addition \nto the general requirements applicable to bank-LSP arrangements as set out \nin paragraph 6 of these Directions. \n21. Restrictions on entering into DLG arrangements \n(1) A bank shall not enter into DLG arrangements for revolving credit facilities \noffered through digital lending channel and credit cards as defined under \nReserve Bank of India (Commercial Banks – Credit Cards and Debit Cards: \nIssuance and Conduct) Directions, 2025.  \n(2) The bank shall not enter into DLG arrangements on the loans which are \ncovered by the credit guarantee schemes administered by trust funds as \nspecified under Reserve Bank of India (Commercial Banks – Prudential Norms \non Capital Adequacy) Directions, 2025. \n22. Structure of DLG arrangements \nDLG arrangements shall be backed by an explicit and legally enforceable contract \nbetween the bank and the DLG provider. Such contract, among other things, shall \ncontain the following details: \n(1) Extent of DLG cover. \n(2) Form in which DLG cover is to be maintained with the bank. \n(3) Timeline for DLG invocation. \n(4) Disclosure requirements as under paragraph 28 of these Directions. \n23. Forms of DLG \nA bank shall accept DLG only in one or more of the following forms:  \n(1) Cash deposited with the bank."}
{"text": "(2) Fixed Deposit maintained with a Scheduled Commercial Bank with a lien \nmarked in favour of the bank. \n(3) Bank Guarantee in favour of the bank. \n24. Cap on DLG \n(1) A bank shall ensure that the total amount of DLG cover on any outstanding \nportfolio which is specified upfront shall not exceed five per cent of the total \namount disbursed out of that loan portfolio at any given time. In case of implicit \nguarantee arrangements, the DLG Provider shall not bear performance risk of \nmore than the equivalent amount of five per cent of the underlying loan \nportfolio.  \n(2) The portfolio over which DLG can be offered shall consist of identifiable and \nmeasurable loan assets which have been sanctioned (the ‘DLG set’). This \nportfolio shall remain fixed for the purpose of DLG cover and is not meant to \nbe dynamic.  \n(3) Illustrative examples on cap on DLG: \nIllustration I \nAssume that as on April 1, 2024 the bank earmarks a portfolio of ₹40 crore \n(out of the total sanctioned loans) under a DLG arrangement (DLG set). This \nportfolio shall remain \"frozen\" for the purpose of the specific DLG arrangement \n- meaning that no loan assets can be added or removed from it, except through \nloan repayment/ write-off. The bank can have such multiple DLG sets. \nThe ceiling for DLG cover on such portfolio shall be fixed at ₹2 crore (5 per \ncent of ₹40 crore), which shall get activated proportionately as and when the \nloans are disbursed. \nIllustration II \nAssume that out of the above DLG set, loans amounting to ₹10 crore are \ndisbursed immediately. Then as on April 1, 2024, the DLG cover available for \nthe portfolio shall be ₹0.5 crore (5 per cent of disbursed). \nSubsequently, if loans of ₹10 crore are further disbursed on April 15, 2024, the \nDLG cover shall proportionately increase to ₹1 crore effective April 15, 2024. \n(Refer table below also for summary of each case)"}
{"text": "Case 1: As on June 30, 2024, loans worth ₹5 crore mature without any default. \nIn this case, the outstanding portfolio in the books of the bank would be ₹15 \ncrore and the DLG cover shall remain at ₹1 crore. \nCase 2: Subsequently, there is a default of ₹2 crore during Q2-2024 and \nconsequently the bank invokes the entire DLG of ₹1 crore (assuming that till \ndate zero principal / interest have been received towards these loans). In this \ncase, as of Sept 30, 2024 the outstanding portfolio in the books of the bank \nshall be ₹15 crore (₹20 crore original portfolio less ₹5 crore loans matured \nwithout default) but no headroom for DLG will be available as the maximum \npermissible DLG cover of ₹1 crore (5 per cent of disbursed) has been \nexhausted. \nCase 3: Going further, let’s assume that recovery worth ₹1 crore is made by \nthe bank during October 2024 on the defaulted loans of ₹2 crore. In such a \ncase, the amount of the outstanding portfolio in the books of the bank as on \nOctober 31, 2024 shall come down to ₹14 crore (₹20 crore original portfolio \nless ₹5 crore loans matured without any default less ₹1 crore loans which were \nin default and recovered). However, the recovery amount of ₹1 crore cannot \nbe added to reinstate the DLG cover. \n(figures in ₹ crore) \nPeriod \nDisbursed \nLoan \nmaturing \nwithout \ndefault \nDefault \nAmount \nDLG \nInvoked \nRecovery/ \nWrite-off \nOutstanding \nPortfolio \nAvailable \nDLG \nCover \nInitial \nPosition \n10 \n- \n- \n- \n- \n10 \n0.5 \nFurther \ndisbursement \n10 \n- \n- \n- \n- \n20 \n1 \nCase 1 \n20 \n5 \n- \n- \n- \n15 \n1 \nCase 2 \n20 \n5 \n2 \n1 \n- \n15 \n0 \nCase 3 \n20 \n5 \n2 \n1 \n1 \n14 \n0 \n \n25. Recognition of NPA \n(1) Recognition of individual loan assets in the portfolio as Non-Performing Asset \n(NPA) and consequent provisioning shall be the responsibility of the bank as \nper the Reserve Bank of India (Commercial Banks – Income Recognition, \nAsset Classification and Provisioning) Directions, 2025 irrespective of any DLG \ncover available at the portfolio level."}
{"text": "(2) The amount of DLG invoked shall not be set off against the underlying \nindividual loans, i.e. the liability of the borrowers in respect of the underlying \nloan shall remain unaffected. \n(3) Recovery by a bank, if any, from the loans on which DLG has been invoked \nand realised, can be shared with the DLG provider in terms of the contractual \narrangement.  \n(4) DLG amount once invoked by the bank shall not be reinstated, including \nthrough loan recovery. \n26. Treatment of DLG for regulatory capital \n(1) Capital computation, i.e., computation of exposure and application of Credit \nRisk Mitigation benefits on individual loan assets in the portfolio shall continue \nto be governed by the Reserve Bank of India (Commercial Banks – Prudential \nNorms on Capital Adequacy) Directions, 2025. \n(2) In case, DLG provider is a bank, it shall deduct full amount of the DLG which is \noutstanding from its capital. \n27. Invocation and tenor of DLG \n(1) A bank shall invoke DLG within a maximum overdue period of 120 days, unless \nthe loan dues are made good by the borrower before that.  \n(2) The period for which the DLG agreement remains in force shall not be less than \nthe longest tenor of the loan in the underlying loan portfolio. \n28. Disclosure requirements \n(1) The bank shall put in place a mechanism to ensure that LSPs with whom they \nhave a DLG arrangement shall publish on their website the total number of \nportfolios and the respective amount of each portfolio on which DLG has been \noffered. The name of the lender(s) may or may not be disclosed as part of \ndisclosure under this provision. \n(2) Disclosure under paragraph (1) above shall be made on a monthly basis, with \nthe disclosure for any given month to be provided no later than seven working \ndays following the conclusion of that month. \n \n \n \n29. Exceptions \nGuarantees covered under the following schemes / entities shall not be covered \nwithin the definition of DLG: \n(1) Guarantee schemes of Credit Guarantee Fund Trust for Micro and Small \nEnterprises (CGTMSE), Credit Risk Guarantee Fund Trust for Low Income \nHousing (CRGFTLIH) and individual schemes under National Credit \nGuarantee Trustee Company Ltd (NCGTC).  \n(2) Credit guarantee provided by Bank for International Settlements (BIS), \nInternational Monetary Fund (IMF) as well as Multilateral Development Banks \nas referred to in Reserve Bank of India (Commercial Banks – Prudential Norms \non Capital Adequacy) Directions, 2025. \nF. General Provisions \n30. EMI programmes on Credit Card are governed specifically by the Reserve Bank \nof India (Commercial Banks – Credit Cards and Debit Cards: Issuance and \nConduct) Directions, 2025. Such transactions shall not be covered under this \nChapter. However other loan products offered on Credit Cards which are not \ncovered / envisaged under the aforesaid Directions shall be governed by the \nstipulations laid down under this Chapter. Further, this Chapter shall also be \napplicable to all loans offered on Debit Card, including EMI programmes. \n31. DLG arrangements entered between a bank and their LSP conforming to the \ninstructions laid down in this Chapter shall neither be treated as “synthetic \nsecuritisation” as defined under the Reserve Bank of India (Commercial Banks – \nSecuritisation Transactions) Directions, 2025, nor attract the provisions of ‘loan \nparticipation’ as defined under the Reserve Bank of India (Commercial Banks – \nTransfer and Distribution of Credit Risk) Directions, 2025."}
{"text": "Chapter IV - Lending against Gold and Silver Collateral  \nBackground: Reserve Bank has restricted lending against primary gold such as gold \nbullion due to broader macro-prudential concerns as also due to speculative and non-\nproductive nature of gold. However, banks have been permitted to lend against the \ncollateral security of gold jewellery, ornaments and coins for meeting the short-term \nfinancing needs of borrowers. The extant regulations are guided, inter alia, by the \nobjective of providing the borrowers an avenue to tide over their tight liquidity \nconditions by leveraging the gold jewellery, ornaments or coins that are kept idle, while \nsimultaneously addressing the risks for the lenders. Similar concerns and objectives \nguide a few regulations issued in the past on lending against the collateral of silver. \n32. 16[*****] \nA. General Provisions  \n33. The credit policy (hereinafter called the policy) of a bank, as required in terms of \nparagraph 5 of these Directions, shall include, inter alia, appropriate single \nborrower limits and aggregate limits for the portfolio of loans against collateral of \njewellery, ornaments or coins made of gold or silver (“eligible collateral” for this \nChapter); maximum LTV ratio permissible for such loans; action to be taken in \ncases of breach of LTV ratio; valuation standards and norms; and standards of \ngold and silver purity. The policy shall also include appropriate documentation to \nbe obtained and maintained for loans proposed to be categorised under priority \nsector lending. \n34. A bank may decide on a suitable approach for lending against eligible collateral as \npart of its credit risk management framework, consistent, inter alia, with the \nprinciple of proportionality and ease of access for small ticket loans. However, \ndetailed credit assessment, including assessment of borrower’s repayment \ncapacity shall be undertaken in case the total loan amount against eligible \ncollateral is above ₹2.5 lakh to a borrower. \nProvided that in case of Bullet repayment loans, the threshold loan amount for \ndetailed credit assessment shall be the total amount payable at maturity. \n \n16 Deleted with effect from April 1, 2026"}
{"text": "35. A bank may renew an existing loan or sanction a top-up loan upon a formal request \nfrom the borrower, subject to a credit assessment in accordance with paragraph \n34. Such renewal or top-up shall be permitted only within the permissible LTV, and \nprovided the loan is classified as standard. Further, renewal of bullet repayment \nloan shall be allowed only after payment of accrued interest, if any. The bank shall \nensure that such renewals and top-ups are clearly identifiable in its Core Banking \nSystem or Loan Processing System.  \nB. Restrictions and Ceilings  \n36. A bank shall not grant any advance or loan: \n(1) For purchase of gold in any form including primary gold, ornaments, jewellery, \nor coins, or for purchase of financial assets backed by gold, e.g., units of \nExchange-traded funds (ETFs) or units of Mutual Funds; and \n(2) against primary gold or silver or financial assets backed by primary gold or \nsilver. \nProvided that a bank may extend need-based working capital finance to \nborrowers who use gold or silver as a raw material or as an input in their \nmanufacturing or industrial processing activity, where such gold or silver can \nalso be accepted as security. A bank extending such finance shall ensure that \nborrowers do not acquire or hold gold for investment or speculative purposes. \n37. A bank shall not extend a loan where ownership of the collateral is doubtful. A \nsuitable document or declaration shall be obtained from the borrower in all cases \nto the effect that the borrower is the rightful owner of the eligible collateral. Multiple \nor frequent sanction of loans against eligible collateral to the same borrower, \naggregating to a value in excess of a threshold to be decided by the lender, must \nbe examined closely as part of the transaction monitoring under the anti-money \nlaundering (AML) framework. \n38. A bank shall not: \n(1) Avail loans by re-pledging gold or silver pledged to it by its borrowers. \n(2) Extend loans to other lenders, entities or individuals by accepting gold or silver \ncollateral pledged to such lenders, entities, or individuals by their borrowers as \ncollateral."}
{"text": "For removal of doubt, it is clarified that the above provision does not preclude a \nlender from financing another lender against the security of underlying \nreceivables. \n39. Tenor of consumption loans in the nature of bullet repayment loans shall be \ncapped at 12 months, which may be renewed in terms of paragraph 35. \n40. Loans against ornaments and coins shall be subject to the following: \n(1) The aggregate weight of ornaments pledged for all loans to a borrower shall \nnot exceed 1 kilogram for gold ornaments, and 10 kilograms for silver \nornaments. \n(2) The aggregate weight of coin(s) pledged for all loans to a borrower shall not \nexceed 50 grams in case of gold coins, and 500 grams in case of silver coins. \nC. Valuation and Assaying of Gold and Silver collateral \n41. Gold or silver accepted as collateral shall be valued based on the reference price \ncorresponding to its actual purity (caratage). For this purpose, the lower of \n(1) the average closing price for gold or silver, as the case may be, of that specific \npurity over the preceding 30 days, or \n(2) the closing price for gold or silver, as the case may be, of that specific purity on \nthe preceding day, as published either by the India Bullion and Jewellers \nAssociation Ltd. (IBJA) or by a commodity exchange regulated by the \nSecurities and Exchange Board of India (SEBI) shall be used.  \n42. If price information for the specific purity is not directly available, the lender shall \nuse the published price available for the nearest available purity and \nproportionately adjust the weight of the collateral based on its actual purity to arrive \nat valuation. \n43. For the purpose of valuation, only the intrinsic value of the gold or silver contained \nin the eligible collateral shall be reckoned and no other cost elements, such as \nprecious stones or gems, shall be added thereto. \nD. Loan to Value Ratio (LTV) \n44. The maximum LTV ratio in respect of consumption loans against the eligible \ncollateral shall not exceed LTV ratios as provided in the table below:"}
{"text": "Total consumption loan \namount per borrower \nMaximum LTV ratio \n≤ ₹2.5 lakh \n85 per cent \n> ₹2.5 lakh & ≤ ₹5 lakh \n80 per cent \n> ₹5 lakh \n75 per cent \nExplanation: ‘Loan to Value (LTV) ratio’ on a day in this context means the ratio of \nthe outstanding loan amount to the value of the pledged collateral or security, as \nthe case may be, on that day. In case of bullet repayment loans, however, the LTV \ncalculation, and the loan amount, shall take into account the total amount \nrepayable at maturity. \n45. The prescribed LTV ratio shall be maintained on an ongoing basis throughout the \ntenor of the loan. \nE. Other Provisions \n46.  For conduct related aspects and collateral management, the bank shall be guided \nby the instructions contained in Reserve bank of India (Commercial Banks - \nResponsible Business Conduct), Directions, 2025. \n47. The bank shall generally disburse loans into borrower’s bank accounts. Banks \nshall comply with the Reserve Bank of India (Commercial Banks – Know Your \nCustomer) Directions, 2025. Provisions of Sections 269 SS and 269 T of the \nIncome Tax Act, 1961, and associated rules shall be complied with, as may be \napplicable. \n48. In case of bank transfers, the bank shall ensure that: \n(1) Loan disbursals are made to the borrower’s account and not to a third-party \naccount; \nExceptions:  \n(i) Disbursals covered exclusively under statutory or regulatory mandate (of \nRBI or of any other regulator),  \n(ii) Flow of money between lenders for co-lending transactions, and  \n(iii) Disbursals for specific end use, provided the loan is disbursed directly into \nthe bank account of the end-beneficiary."}
{"text": "(2) Loan servicing, repayment, etc. is executed by the borrower directly in the \nbank’s account without any pass-through account or pool account of any third \nparty. \n49. Running multiple loans simultaneously to a single borrower or a group of related \nborrowers may be prone to misuse and susceptible to fraud. Consequently, such \npractices shall be subject to stricter internal audit and supervisory examination. \n50. For instructions on disclosure requirements, the bank shall be guided by the \ninstructions contained in Reserve Bank of India (Commercial Banks – Financial \nStatements: Presentation and Disclosures) Directions, 2025. \n \n \n \n17[ \nChapter V - [Deleted] \n \n51. ***** \n52. ***** \n53. ***** \n54. ***** \n55. ***** \n56. ***** \n57. ***** \n58. ***** \n59. ***** \n60. *****] \n \n \n \n \n17 Deleted with effect from April 01, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities) \nAmendment Directions, 2025 dated December 04, 2025."}
{"text": "18[ \nChapter VA - Gold Metal Loans (GML)  \nA. Introduction \n60A. The Gold Metal Loan (GML) scheme was launched in 1998 as per Export Import \nPolicy 1997-2002 and the Handbook of Procedures of the Exim Policy to address \nthe need of working capital finance of the jewellery industry. Over time, the scope \nof the GML scheme has been broadened to cater to the changing business \nrequirement of the jewellery industry. This Chapter prescribes GML related \nprudential guidelines to address and manage the risks inherent in extending GML \nto borrowers. \nB. Eligible Banks \n60B. Nominated banks importing gold as per the provisions of the Master Direction – \nImport of Goods and Services, as updated from time to time, may extend import-\nlinked GML to entities who either manufacture and / or sell jewellery in domestic \nand / or export markets (collectively hereinafter referred to as ‘jewellers’). \nProvided that, jewellers who are not manufacturers themselves, may borrow under \nGML only for outsourcing their manufacturing of jewellery on job basis to any \nmanufacturing firms / artisans / goldsmiths. \n60C. Designated banks implementing the GMS may extend GMS-linked GML to \nfollowing categories of borrowers: \n(1) Jewellers for the purposes as specified in paragraph 60B above, and \n(2) MMTC Limited for minting India Gold Coins (IGC). \nC. General Instructions \n60D. A bank shall lay down a lending and risk management policy for GML which shall, \ninter alia, prescribe the categories of GML which the bank desires to undertake, a \nlimit on the quantity of gold that may be lent per borrower as well as total quantity \nof such loans that may be outstanding at any point of time. The policy shall also \n \n18 Inserted with effect from April 01, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities) \nAmendment Directions, 2025 dated December 04, 2025."}
{"text": "lay down the detailed due-diligence requirements for deciding the eligibility of GML \nborrowers and their credit requirements. \n60E. GML shall be subject to capital adequacy and other prudential requirements \napplicable to a lender, similar to any other loan exposure. For all prudential and \naccounting purposes, GML shall be valued daily at an amount arrived at by \nconverting the gold quantity lent into Indian Rupees by crossing LBMA (London \nBullion Market Association) Gold AM price fixing for Gold / US Dollar rate with the \nIndian Rupee-US Dollar reference rate. \n60F. GML shall not involve any direct or indirect liability of the borrowers towards the \nlenders’ source of the gold, i.e., the overseas supplier of gold (consignor) or the \nGMS gold deposit account holder. \n60G. A bank shall put in place mechanism to monitor on an ongoing basis the \nexposure level and the end-use of the gold being lent to borrowers under GML \nscheme and ensure that the gold borrowed under GML scheme is neither sold nor \nexported by borrowers in the form of primary gold. \n60H. A bank may extend GML to jewellers who are not their regular customers by \naccepting stand-by letter of credit (SBLC) or bank guarantee (BG) denominated in \nINR, issued by other scheduled commercial banks that maintain business \naccounts of the jewellers, notwithstanding any provisions of Chapter XVI of these \nDirections. Such arrangements shall be subject to independent credit \nassessments by both the GML providing bank and the SBLC / BG issuing bank. \nFurther, the SBLC / BG issuing bank shall maintain adequate margin, during the \ntenor of the loan, consistent with the volatility of the gold prices. \n60I. A bank may decide interest rates on GML based on costs of procuring and holding \ngold, and relevant spreads as per their interest rate policies. \nD. Repayment of GML \n60J. In case of lending to jewellery exporters, the repayment tenor of GML shall be \nfixed by a bank subject to the terms and conditions of the extant Foreign Trade \nPolicy (FTP) and the Handbook of Procedures of the FTP."}
{"text": "60K. For all GML other than lending to jewellery exporters, a bank may fix a repayment \ntenor as per its policy, in alignment with working capital cycle of the jeweller, \nsubject to a ceiling of 270 days. \n60L. Repayment of GML (both principal and interest amounts) shall be made in INR, \ncalculated on the basis of prevailing value of the gold lent. \nProvided that, in respect of GMS-linked GML, a bank shall also provide an option \nto the borrower to repay a part or full of the ‘principal amount’ in physical gold, \nprovided: \n(1) repayment is made using locally sourced IGDS (India Good Delivery \nStandards) / LGDS (LBMA’s Good Delivery Standards) gold; \n(2) gold is delivered on behalf of the borrower to the bank directly by the refiner or \na central agency, acceptable to the bank, without the borrower’s involvement; \n(3) the loan agreement contains details of the option to be exercised by the \nborrower, acceptable standards and manner of delivery of gold for repayment; \n(4) the borrower is apprised upfront, in a transparent manner, of the implications \nof exercising the option. \nE. Disclosures \n60M. A bank shall report the GML data to the Reserve Bank on a quarterly basis by \nseventh day of the following month as per the format given in Annex - V.]"}
{"text": "Chapter VI - Microfinance   \nA. Definition of Microfinance  \n61. A microfinance loan is defined as a collateral-free loan given to a household having \nannual household income up to ₹3,00,000. For this purpose, the household shall \nmean an individual family unit, i.e., husband, wife and their unmarried children. \n62. All collateral-free loans, irrespective of end use and mode of application / \nprocessing / disbursal (either through physical or digital channels), provided to low-\nincome households, i.e., households having annual income up to ₹3,00,000 shall \nbe considered as microfinance loans.  \nExplanation: To ensure collateral-free nature of the microfinance loan, the loan \nshall not be linked with a lien on the deposit account of the borrower or backed by \nhypothecation of any security.  \nB. Assessment of Household Income \n63. Each bank shall put in place a board-approved policy for assessment of household \nincome. Indicative methodology for assessment of household income is outlined \nbelow:  \n(1) For undertaking the income assessment of a low-income household, \ninformation related to following parameters may be captured by the lender:  \n(i) Parameters to capture household profile  \n(a) Composition of the household  \ni. \nNumber of earning members  \nii. Number of non-earning members  \n(b) Type of accommodation (owned / rented, etc.)  \n(c) Availability of basic amenities (electricity, water, toilet, sewage, LPG \nconnection, etc.)  \n(d) Availability of other assets (land, livestock, vehicle, furniture, \nsmartphone, electronic items, etc.)  \n(ii) Parameters to capture household income  \n(a) Primary source of income  \ni. \nSector \nof \nwork \n(Agriculture \n& \nallied \nactivities, \ntrading, \nmanufacturing, services, etc.)"}
{"text": "ii. Nature of work (Self-employed or salaried, regular or seasonal, \netc.)  \niii. Frequency of income (daily / weekly / monthly)  \niv. Months / days of employment over last one year  \nv. Self-reported monthly income  \nvi. Average monthly income (to be derived from (iv) & (v) above)  \n(b) Other sources of income  \ni. \nRemittance  \nii. Rent / Lease  \niii. Pension  \niv. Government transfer  \nv. Scholarship  \nvi. Others (specify details)  \n(c) The income assessment as above may be carried out for all earning \nmembers with respect to all sources (primary or secondary) of income. \nWhile assessing income of all members from all sources, it may be \nensured that there is no double counting of income such as counting of \nsalary income of one migrant member also as remittance income for \nthe household.  \n(d) While the income computation may be done on a monthly basis, the \nincome assessment for all members and sources may be carried out \nover a period of minimum one year to ascertain the stability of the \nhousehold income.  \n(iii) Parameters to capture household expenses  \n(a) Regular monthly expenses (food, utilities, transport, house / shop rent, \nclothing, regular medical costs, school / college fees, etc.)  \n(b) Irregular expenses over last one year (medical expenses, house \nrenovation, purchase of household goods, functions, etc.)  \n(2) Self-reported income at 1(ii) above may be corroborated with the profile of \nhousehold at 1(i) and household expenses at 1(iii). Further, household income \nmay also be verified from other sources (bank account statements of the \nborrowers, group members, other references in the vicinity, etc.)."}
{"text": "64. Self-regulatory organisations (SROs) and other associations / agencies may also \ndevelop a common framework based on the indicative methodology. The banks \nmay adopt / modify this framework suitably as per their requirements with approval \nof their boards.  \n65. Each bank shall mandatorily submit information regarding household income to \nthe Credit Information Companies (CICs). Reasons for any divergence between \nthe already reported household income and assessed household income shall be \nspecifically ascertained from the borrower(s) before updating the assessed \nhousehold income with CICs.  \nC. Limit on Loan Repayment Obligations of a Household \n66. Each bank shall have a board-approved policy regarding the limit on the outflows \non account of repayment of monthly loan obligations of a household as a \npercentage of the monthly household income. The limit on the outflows on account \nof repayment of monthly loan obligations of a household shall be limited to a \nmaximum 50 per cent of the monthly household income.  \nExplanation: Any future expected income from the asset/ activity financed by a \nmicrofinance loan shall not be included in the household income for the purpose \nof calculating the indebtedness of the household. \n67. The computation of loan repayment obligations shall take into account all \noutstanding loans (collateral-free microfinance loans as well as any other type of \ncollateralized loans) of the household. The outflows capped at 50 per cent of the \nmonthly household income shall include repayments (including both principal as \nwell as interest component) towards all existing loans as well as the loan under \nconsideration.  \n68. Existing loans, for which outflows on account of repayment of monthly loan \nobligations of a household as a percentage of the monthly household income \nexceed the limit of 50 per cent, shall be allowed to mature. However, in such cases, \nno new loans shall be provided to these households till the prescribed limit of 50 \nper cent is complied with.  \n69. Each bank shall provide timely and accurate data to the CICs and use the data \navailable with them to ensure compliance with the level of indebtedness. Besides,"}
{"text": "the bank shall also ascertain the same from other sources such as declaration \nfrom the borrowers, their bank account statements and local enquiries.  \nD. Other provisions \n70. The bank shall have a board-approved policy to provide the flexibility of repayment \nperiodicity on microfinance loans as per borrowers’ requirement. \n71.  The bank providing microfinance loans shall refer to: \n(1) Reserve Bank of India (Commercial Banks – Interest Rates on Advances) \nDirections, 2025 for pricing of loans. \n(2) Reserve Bank of India (Commercial Banks – Responsible Business Conduct) \nDirections, 2025 for instructions related to Key Fact Statement and guidelines \non conduct towards microfinance borrowers. \n(3) Reserve Bank of India (Commercial Banks – Managing Risks in Outsourcing) \nDirections, 2025 for instructions pertaining to responsibilities for outsourced \nactivities."}
{"text": "Chapter VII - Project Finance  \nThe directions contained in this Chapter provide a harmonised framework for financing \nof projects in infrastructure and non-infrastructure (including commercial real estate & \ncommercial real estate - residential housing) sectors by banks.  \n72. The directions contained in this Chapter shall not apply to projects where financial \nclosure has been achieved as on October 1, 2025 (the ‘Effective Date’ for this \nChapter) for which the prudential guidelines on project finance prevailing before \nOctober 1, 2025, which otherwise shall be treated as repealed, shall apply. \nHowever, any resolution of a fresh credit event and / or change in material terms \nand conditions in the loan contract in such projects, subsequent to the effective \ndate, shall be as per the guidelines under the Reserve Bank of India (Commercial \nBanks – Resolution of Stressed Assets) Directions, 2025. \nA. Phases of Projects  \n73. For the purpose of application of prudential guidelines contained in this Chapter, \nProjects shall be broadly divided into three phases namely:  \n(1) Design phase – This is the first phase which starts with the genesis of the \nproject and includes, inter-alia, designing, planning, obtaining all applicable \nclearances / approvals till its financial closure.  \n(2) Construction phase – This is the second phase which begins after the financial \nclosure and ends on the day before the actual DCCO.  \n(3) Operational Phase – This is the last phase which starts with commencement \nof commercial operation by the project on the day of the actual DCCO and \nends with full repayment of the project finance exposure.  \nB. Prudential Conditions Related to Sanction \n74. The credit policy of a bank shall incorporate suitable clauses for sanction of project \nfinance exposures, taking into account inter alia the provisions under this Chapter. \n75. For all projects financed by the bank, it shall be ensured that: \n(1) Financial closure has been achieved and original DCCO is clearly spelt out and \ndocumented prior to disbursement of funds. \n(2) The project specific disbursement schedule vis-à-vis stage of completion of the \nproject is included in the loan agreement."}
{"text": "(3) The post DCCO repayment schedule has been realistically designed to factor \nin the initial cash flows. \nProvided that, the original or revised repayment tenor, including the \nmoratorium period, if any, shall not exceed 85 per cent of the economic life of \na project. \n76. For a given project, original / extended / actual DCCO, as the case may be, shall \nbe same across all lenders to the project. \n77. In under-construction projects where the aggregate exposure of the lenders is up \nto ₹1,500 crore, no individual bank shall have an exposure which is less than 10 \nper cent of the aggregate exposure. For projects where aggregate exposure of all \nlenders is more than ₹1,500 crore, the exposure floor for an individual bank shall \nbe 5 per cent or ₹150 crore, whichever is higher. \nProvided that, the above minimum exposure requirements shall not apply post-\nactual DCCO and banks may freely acquire from or sell exposures to other lenders, \nin compliance with guidelines contained in the Reserve Bank of India (Commercial \nBanks – Transfer and Distribution of Credit Risk) Directions, 2025. Prior to actual \nDCCO, banks may acquire from or sell exposures to other lenders under a \nsyndication arrangement (as specified under the Reserve Bank of India \n(Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025), \nprovided the share of individual bank is in adherence to the above limits. \n78. A bank shall ensure that all applicable approvals / clearances for implementing / \nconstructing the project are obtained before financial closure. An indicative list of \nsuch pre-requisite approvals / clearances includes environmental clearance, legal \nclearance, regulatory clearances, etc., as applicable to the project. \n19[Explanation: Where it is possible for a project to be operationalised as multiple \nindependent viable units, a bank may at its discretion finance such independent \nunits as separate projects with their own financial closure, provided each unit is \nappraised ex-ante for standalone viability.] \n \n19 Inserted with effect from July 15, 2026, vide Reserve Bank of India (Commercial Banks – Credit Facilities) Fifth \nAmendment Directions, 2026 dated July 15, 2026."}
{"text": "79. Approvals / clearances which are contingent upon achievement of certain \nmilestones in terms of project completion shall be deemed to be applicable only \nwhen such milestones are achieved. For example, consent to operate a boiler can \nonly be applied for after the construction of a boiler. Hence, the same shall not be \ntreated as an applicable mandatory pre-requisite at the time of financial closure. \nC. Prudential Conditions Related to Disbursement and Monitoring \n80. A bank shall ensure availability of sufficient land / right of way for all projects before \ndisbursement of funds, subject to the following minimum requirements: \n(1) For infrastructure projects under PPP model – 50 per cent \n(2) For all other projects (non-PPP infrastructure, and non-infrastructure including \nCRE & CRE-RH) – 75 per cent  \n(3) For transmission line projects – as decided by the bank \n20[Explanation: For the purpose of this paragraph, for projects in electricity \ngeneration where the project scope involves both generation and transmission \n(evacuation infrastructure), the right of way requirement for transmission may be \ndetermined as per sub-paragraph (3).] \n81. In case of infrastructure projects under PPP model, disbursement of funds shall \nbegin only after declaration of the Appointed Date or its equivalent, for the project. \nHowever, in cases where non-fund based credit facilities may be mandated by the \nconcession granting authority as a pre-requisite for declaration of appointed date, \nthe bank may sanction such credit facilities, in adherence with the instructions on \nnon-fund based facilities as prescribed in Chapter XVI of these Directions.  \n82. Further, in respect of the exposures mentioned at paragraph 81 above, the original \nDCCO documented in the financial closure document shall be modified to reflect \nany change in the ‘Appointed Date’ by the Concession granting authority prior to \ndisbursement of funds by way of a supplementary agreement between a lender \nand the debtor subject to reassessment of project viability and obtention of \nsanction from appropriate authorities. A Techno-Economic Viability (TEV) study \n \n20 Inserted with effect from July 15, 2026, vide Reserve Bank of India (Commercial Banks – Credit Facilities) Fifth \nAmendment Directions, 2026 dated July 15, 2026."}
{"text": "shall be required for this purpose for all projects where the aggregate exposure of \nall lenders is ₹100 crore or more. \n83. The bank shall ensure that disbursal is proportionate to the stages of completion \nof the project as also to the progress in equity infusion and other sources of \nfinance, agreed as part of financial closure and receipt of remaining applicable \nclearances. The lender’s independent engineer (LIE) / architect shall certify the \nstages of completion of the project. \n84. A project finance account may be classified as NPA during any time before actual \nDCCO as per record of recovery, in terms of the Reserve Bank of India \n(Commercial banks - Income Recognition, Asset Classification and Provisioning) \nDirections, 2025. \nD. Other Provisions \n85. Creation and Maintenance of Database - Project specific data, in electronic and \neasily accessible format, shall be captured and maintained by the bank on an \nongoing basis. A list of the relevant parameters which shall form part of project \nfinance database, at a minimum, is given below. \nNo \nParameters for Project Finance Database \n1 \nDebtor Profile  \nName of the Project/SPV, PAN, LEI, Name(s) of the Sponsor, Shareholding details, \nBanking Arrangement, Sector, Sub-Sector. \n2 \nOriginal Project Profile  \nNature of Project, External Credit Rating, Economic Life, Date of Financial Closure, original \nDate of Commencement of Commercial Operations, Total project cost excluding IDC, IDC, \nCapital Structure, D/E, DSCR, Repayment Tenor, Repayment Start Date, Repayment \nFrequency. \n3 \nChange in DCCO  \nDate of Change, reason for change, extended DCCO, revised project debt, revised project \ntotal cost, increase in cost, cost overrun, % of total increase financed by equity, % of total \nincrease financed by debt, revised D/E, revised DSCR, revised repayment tenor, revised \nrepayment start date, revised repayment frequency, revised external credit rating. \n4 \nCredit event other than deferment of original/extended DCCO  \nDate of Change, reason, total increase in project cost, % of project cost financed through \nequity, % of project cost financed through debt, revised D/E, revised DSCR, revised \nrepayment tenor, revised repayment start date, revised repayment frequency, revised \nexternal credit rating."}
{"text": "5 \nCurrent Specification of the Project  \nAsset classification, original/ extended DCCO, economic life, external rating, total \noutstanding, provision held, current project cost excluding IDC, IDC, current capital \nstructure, D/E, DSCR, repayment tenor, repayment frequency. \n86. The bank shall update any change in parameters of a project finance exposure at \nthe earliest, but not later than 15 days from such change. The necessary system \nin this regard shall be put in place within three months of the effective date. \n87. The bank shall make appropriate disclosures in their financial statements, under \n‘Notes to Accounts’, as specified in the Reserve Bank of India (Commercial Banks \n– Financial Statements: Presentation and Disclosures) Directions, 2025."}
{"text": "Chapter VIII - Credit Facilities to Real Estate Sector \nA. Loans and advances to Real Estate Sector \n88. A bank shall put in place a comprehensive Board-approved policy relating to the \nceiling on the total amount of real estate loans, single / group exposure limits for \nsuch loans, margins, security, repayment schedule and availability of \nsupplementary finance.  \nB. Housing Finance \n89. The bank shall take into account the following directions while formulating their \npolicy and ensure that bank credit is used for productive construction activities and \nnot for activities connected with speculation in real estate. The following shall fall \nunder the definition of Housing Finance: \nB.1  \nAcquisition of Land \n90. Bank finance may be granted for purchase of a plot, provided a declaration is \nobtained from the borrower that he intends to construct a house on the said plot, \nwith the help of bank finance or otherwise, within such period as may be laid down \nby the banks themselves. \nB.2  \nConstruction of Building / Ready-built House \n91. The bank granting loans / financing for construction of building or ready built house \nshall be guided by the following: \n(1) The bank may grant loans to individuals for purchase / construction of dwelling \nunit per family and loans for repairs to the damaged dwelling units of families. \n(2) The bank may extend finance to a person who already owns a house in town / \nvillage where they reside, for buying / constructing a second house in the same \nor other town / village for the purpose of self-occupation. \n(3) The bank may extend finance for purchase of a house by a person who \nproposes to let it out on rental basis on account of their posting outside the \nheadquarters or because they have been provided accommodation by their \nemployer. \n(4) The bank may extend finance to a person who proposes to buy the house \nwhere they are presently residing as a tenant."}
{"text": "(5) The bank may finance for construction meant for improving the conditions in \nslum areas for which credit may be extended directly to the slum-dwellers on \nthe guarantee of the Government, or indirectly to them through the State \nGovernments. \n(6) The bank may provide credit for slum improvement schemes to be \nimplemented by Slum Clearance Boards and other public agencies. \n92. The bank shall adhere to the following conditions, in the light of the observations \nof Delhi High Court on unauthorized construction: \n(1) In cases where the applicant owns a plot / land and approaches the bank for a \ncredit facility to construct a house, a copy of the sanctioned plan by competent \nauthority in the name of a person applying for such credit facility shall be \nobtained by the bank before sanctioning the home loan. \n(2) An affidavit-cum-undertaking shall be obtained from the persons applying for \nsuch credit facility that they shall not violate the sanctioned plan, construction \nshall be strictly as per the sanctioned plan and it shall be the sole responsibility \nof the executants to obtain completion certificate within 3 months of completion \nof construction, failing which the bank shall have the power and the authority \nto recall the entire loan with interest, costs and other usual bank charges. \n(3) An Architect appointed / empanelled by the bank shall also certify at various \nstages of construction of building that the construction of the building is strictly \nas per sanctioned plan and shall also certify at a particular point of time that \nthe completion certificate of the building issued by the competent authority has \nbeen obtained. \n(4) In cases where the applicant approaches the bank for a credit facility to \npurchase a built-up house / flat, it shall be mandatory for them to declare by \nway of an affidavit-cum-undertaking that the built up property has been \nconstructed as per the sanctioned plan and /or building bye-laws and as far as \npossible has a completion certificate also. \n(5) An Architect appointed / empanelled by the bank shall also certify before \ndisbursement of the loan that the built-up property is strictly as per sanctioned \nplan and / or building byelaws."}
{"text": "(6) No loan should be given in respect of those properties which fall in the category \nof unauthorized colonies unless and until they have been regularized and \ndevelopment and other charges paid. \n(7) No loan should also be given in respect of properties meant for residential use \nbut which the applicant intends to use for commercial purposes and declares \nso while applying for loan. \nB.3  \nSupplementary Finance \n93. The Bank may consider requests for additional finance within the overall ceiling for \ncarrying out alterations / additions / repairs to the house / flat already financed by \nthem.  \n94. In the case of individuals who might have raised funds for construction / acquisition \nof accommodation from other sources and need supplementary finance, the bank \nmay extend such finance after obtaining pari passu or second mortgage charge \nover the property mortgaged in favour of other lenders and / or against such other \nsecurity, as it may deem appropriate. \n95. The Bank may consider granting finance to – \n(1) The bodies constituted for undertaking repairs to houses, and \n(2) The owners of building / house / flat, whether occupied by themselves or by \ntenants, to meet the need-based requirements for their repairs / additions, after \nsatisfying itself regarding the estimated cost (for which requisite certificate \nshould be obtained from an Engineer / Architect, wherever necessary) and \nobtaining such security as deemed appropriate. \nB.4  \nExclusions under Housing Finance \n96. The bank shall not grant finance for the following: \n(1) Construction of buildings meant purely for Government / Semi-Government \noffices, including Municipal and Panchayat offices. However, the bank may \ngrant loans for activities, which will be refinanced by institutions like NABARD. \n(2) Projects undertaken by public sector entities which are not corporate bodies \n(i.e. public sector undertakings which are not registered under Companies Act \nor which are not Corporations established under the relevant statute) shall not \nbe financed by the bank. Even in respect of projects undertaken by corporate"}
{"text": "bodies, as defined above, the bank shall satisfy itself that the project is run on \ncommercial lines and that bank finance is not in lieu of or to substitute \nbudgetary resources envisaged for the project. The loan could, however, \nsupplement budgetary resources if such supplementing was contemplated in \nthe project design. Thus, in the case of a housing project, where the project is \nrun on commercial lines, and the Government is interested in promoting the \nproject either for the benefit of the weaker sections of the society or otherwise, \nand a part of the project cost is met by the Government through subsidies \nmade available and / or contributions to the capital of the institutions taking up \nthe project, the bank finance shall be restricted to an amount arrived at after \nreducing from the total project cost the amount of subsidy / capital contribution \nreceivable from the Government and any other resources proposed to be \nmade available by the Government. \n(3) Banks had, in the past, sanctioned term loans to Corporations set up by \nGovernment like State Police Housing Corporation, for construction of \nresidential quarters for allotment to employees where the loans were \nenvisaged to be repaid out of budgetary allocations. As these projects cannot \nbe considered to be run on commercial lines, the bank shall not grant loans to \nsuch projects. \nB.5  \nLending to Housing Intermediary Agencies \n97. The bank granting loans to housing Intermediary agencies shall be guided by the \nfollowing: \nB.5.1. Financing of Land Acquisition \n98. In view of the need to increase the availability of land and house sites for increasing \nthe housing stock in the country, the bank shall extend finance to public agencies \nand not private builders for acquisition and development of land, provided it is a \npart of the complete project, including development of infrastructure such as water \nsystems, drainage, roads, provision of electricity, etc. Such credit shall be \nextended by way of term loans. The project shall be completed as early as possible \nand, in any case, within three years, If the project covers construction of houses, \ncredit extended therefor in respect of individual beneficiaries shall be on the same \nterms and conditions as stipulated for financing the beneficiary directly."}
{"text": "99. For valuation of properties including collaterals accepted for their exposures, the \nbank shall be guided by the instructions contained in of Reserve Bank of India \n(Commercial banks - Credit Risk Management), Directions, 2025.  \n100. For valuation of land for the purpose of financing of land acquisition as also land \nsecured as collateral, the bank shall be guided as under: \n(1) The bank may extend finance to public agencies and not to private builders for \nacquisition and development of land, provided it is a part of the complete \nproject, including development of infrastructure such as water systems, \ndrainage, roads, provision of electricity, etc. In such limited cases where land \nacquisition can be financed, the finance is to be limited to the acquisition price \n(current price) plus development cost. The valuation of such land as prime \nsecurity shall be limited to the current market price. \n(2) Wherever land is accepted as collateral, valuation of such land shall be at the \ncurrent market price only. \nB.5.2. Lending to Housing Finance Institutions \n101. The bank granting term loans to housing finance institutions shall take into \naccount (long-term) debt-equity ratio, track record, recovery performance and \nother relevant factors including the provisions of Chapter XIV of these Directions. \nB.5.3. Lending to Housing Boards and Other Agencies \n102. The bank may extend term loans to state level housing boards and other public \nagencies keeping in view the past performance of these agencies in the matter of \nrecovery from the beneficiaries and shall also stipulate that the Boards will ensure \nprompt and regular recovery of loan instalments from the beneficiaries. \nB.5.4. Term Loans to Private Builders \n103.  The bank may extend credit to private builders on commercial terms by way of \nloans linked to each specific project. \n104.  The bank shall not extend fund based or non-fund based facilities to private \nbuilders for acquisition of land even as part of a housing project. \n105. The period of credit for loans extended by a bank to private builders may be \ndecided by the bank itself based on its commercial judgment subject to usual \nsafeguards and after obtaining such security, as it shall deem appropriate."}
{"text": "106. Such credit may be extended to builders of repute, employing professionally \nqualified personnel. It shall be ensured, through close monitoring, that no part of \nsuch funds is used for any speculation in land. \n107. Care shall be taken to see that prices charged from the ultimate beneficiaries \ndo not include any speculative element, that is, prices shall be based only on the \ndocumented price of land, the actual cost of construction and a reasonable profit \nmargin. \nB.5.5. Terms and Conditions for Lending to Housing Intermediary Agencies \n108. The bank may grant term loans to housing intermediary agencies against the \ndirect loans sanctioned / proposed to be sanctioned by the latter, irrespective of \nthe per borrower size of the loan extended by these agencies. \n109. The bank may grant term loans to housing intermediary agencies against the \ndirect loans sanctioned / proposed to be sanctioned by them to Non-Resident \nIndians(NRIs) also. However, the bank shall ensure that housing finance \nintermediary agencies being financed by it are authorised by the Reserve Bank to \ngrant housing loans to NRIs as all housing finance intermediaries are not \nauthorised by the Reserve Bank to provide housing finance to NRIs. \n110. Lending to housing intermediary agencies shall be subject to the instructions \non Commercial Real Estate exposure, as outlined in paragraphs 125 to 133 of \nthese Directions. \nB.6  \nQuantum of Loan \n111. The bank shall abide by the following Loan to Value (LTV) and Risk Weights \n(RWs) while deciding the quantum of loan to be granted as housing finance: \nCategory of Loan \nLTV \nRatio (%) \nRisk Weight (%) \n(a) Individual Housing Loans \n \n \nUp to ₹30 lakh \n≤ 80 \n35 \n> 80 and ≤ 90 \n50 \nAbove ₹30 lakh & up to ₹75 lakh \n≤ 80 \n35 \nAbove ₹75 lakh \n≤ 75 \n50 \n(b) CRE – RH# \nNA \n75"}
{"text": "# CRE-RH has been defined at paragraph 131. \nProvided that the LTV ratios and Risk Weights for Claims secured by residential \nproperty for loans sanctioned till June 06, 2017 shall be as set out below  \nCategory of loan \nLTV ratio (%) Risk weight (%) \n(a) Individual Housing Loans \n(i) Up to ₹30 lakh \n≤80 \n35 \n>80 and ≤90 \n50 \n(ii) Above ₹30 lakh and up to ₹75 lakh \n≤75 \n35 \n>75 and ≤80 \n50 \n(iii) Above ₹75 lakh \n≤75 \n75 \n(b) Commercial real estate – residential housing \n(CRE-RH) \nN A \n75 \n(c) Commercial Real Estate (CRE) \nN A \n100 \n112. As a counter cyclical measure, for Individual Housing Loans sanctioned on or \nafter October 16, 2020, and up to March 31, 2023, the risk weights shall be as \nunder: \nLTV Ratio (%) Risk Weight (%) \n≤ 80 \n35 \n> 80 and ≤ 90 \n50 \n113. In order to have uniformity in the practices adopted for deciding the value of the \nhouse property while sanctioning housing loans, bank shall not include stamp duty, \nregistration and other documentation charges in the cost of the housing property \nit finances so that the effectiveness of LTV norms is not diluted.  \nExemption: In cases where the cost of the house / dwelling units does not exceed \n₹10 lakh, the bank may add stamp duty, registration and other documentation \ncharges to the cost of the house/dwelling unit for the purpose of calculating LTV \nratio. \nB.7  \nInnovative Housing Loan Products – Upfront Disbursal of Housing Loans \n114. It has been observed that some banks have introduced certain innovative \nHousing Loan Schemes in association with developers / builders, e.g., upfront"}
{"text": "disbursal of sanctioned individual housing loans to the builders without linking the \ndisbursals to various stages of construction of housing project, Interest / EMI on \nthe housing loan availed of by the individual borrower being serviced by the \nbuilders during the construction period/ specified period, etc. This might include \nsigning of tripartite agreement between the bank, the builder and the buyer of the \nhousing unit. These loans products are popularly known by various names like \n80:20, 75:25 schemes etc. \n115. Such housing loan products are likely to expose the banks as well as their home \nloan borrowers to additional risks e.g., in case of dispute between individual \nborrowers and developers / builders, default / delayed payment of interest / EMI \nby the developer / builder during the agreed period on behalf of the borrower, non-\ncompletion of the project on time etc. Further, any delayed payments by \ndevelopers / builders on behalf of individual borrowers to banks may lead to lower \ncredit rating / scoring of such borrowers by CICs as information about servicing of \nloans get passed on to the CICs on a regular basis. In cases, where bank loans \nare also disbursed upfront on behalf of their individual borrowers in a lump-sum to \nbuilders / developers without any linkage to stages of constructions, banks run \ndisproportionately higher exposures with concomitant risks of diversion of funds. \n116. Disbursal of housing loans sanctioned to individuals shall be closely linked to \nthe stages of construction of the housing project / houses and upfront disbursal \nshall not be made in cases of incomplete / under-construction / green field housing \nprojects. \n117. However, in cases of projects sponsored by Government / Statutory Authorities, \nthe bank may disburse the loans as per the payment stages prescribed by such \nauthorities, even where payments sought from house buyers are not linked to the \nstages of constructions, provided such authorities have no past history of non-\ncompletion of projects. \n118. It is emphasized that the bank while introducing any kind of product shall take \ninto account the customer suitability and appropriateness and also ensure that the \nborrowers / customers are made fully aware of the risks and liabilities under such \nproducts."}
{"text": "B.8  \n Disclosure Requirements \n119. In view of the observations of Hon’ble High Court of Judicature at Bombay, \nwhile granting finance to specific housing / development projects, the bank shall \nstipulate as a part of the terms and conditions that: \n(1) the builder / developer / company shall disclose in the Pamphlets / Brochures \netc., the name(s) of the bank(s) to which the property is mortgaged. \n(2) the builder / developer / company shall append the information relating to \nmortgage while publishing advertisement of a particular scheme in \nnewspapers / magazines etc. \n(3) the builder / developer / company shall indicate in their pamphlets / brochures, \nthat they shall provide No Objection Certificate (NOC) / permission of the \nmortgagee bank for sale of flats / property, if required. \n(4) The bank shall ensure compliance of the above terms and conditions and funds \nshall not be released unless the builder / developer / company fulfils the above \nrequirements. \n(5) The above-mentioned provisions will be mutatis-mutandis, applicable to \nCommercial Real Estate also. \n120. Approvals from Statutory / Regulatory Authorities: \nWhile appraising loan proposals involving real estate, the bank shall ensure that \nthe borrowers obtain prior permission from government / local governments / other \nstatutory authorities for the project, wherever required. In order that the loan \napproval process is not hampered on account of this, while the proposals could be \nsanctioned in normal course, the disbursements shall be made only after the \nborrower has obtained requisite clearances from the government authorities. \n121. Housing Loans Under Priority Sector \nThe grant of housing loan for the purpose of the priority sector lending targets \nincluding reporting requirements will additionally be subject to the instructions on \n“Priority Sector Lending” as amended from time to time. \n122. National Building Code (NBC) \nThe Bank shall adhere to the National Building Code (NBC) formulated by the \nBureau of Indian Standards (BIS), considering the importance of safety of buildings"}
{"text": "especially against natural disasters. The bank may consider incorporating this \naspect in their loan policy. The bank may also adopt the guidelines issued by the \nNational Disaster Management Authority (NDMA) and suitably incorporate them \ninto their loan policy, procedures and documentation. \n123. For pricing of housing finance, the bank shall be guided by the provisions \ncontained in the Reserve Bank of India (Commercial Banks – Interest Rates on \nAdvances) Directions, 2025. \n124. For Fair Lending Practices and the reset of floating interest rate on Equated \nMonthly Instalments (EMI) based personal loans, the bank shall be guided by the \nprovisions of the Reserve Bank of India (Commercial Banks – Responsible \nBusiness Conduct) Directions, 2025 \nC. Loans and advances to Commercial Real Estate (CRE) \n125. Definition of Commercial Real Estate (CRE) Exposure \n(1) Real Estate is generally defined as an immovable asset - land (earth space) \nand the permanently attached improvements to it. Income-producing real \nestate (IPRE) has been defined in paragraph 226 of the Basel-II Framework, \nwhich is reproduced below: \n\"Income-producing real estate (IPRE) refers to a method of providing funding \nto real estate (such as, office buildings to let, retail space, multifamily \nresidential buildings, industrial or warehouse space, and hotels) where the \nprospects for repayment and recovery on the exposure depend primarily on \nthe cash flows generated by the asset. The primary source of these cash flows \nwould generally be lease or rental payments or the sale of the asset. The \nborrower may be, but is not required to be, an SPE (Special Purpose Entity), \nan operating company focused on real estate construction or holdings, or an \noperating company with sources of revenue other than real estate. The \ndistinguishing characteristic of IPRE versus other corporate exposures that are \ncollateralised by real estate is the strong positive correlation between the \nprospects for repayment of the exposure and the prospects for recovery in the \nevent of default, with both depending primarily on the cash flows generated by \na property\"."}
{"text": "(2) An exposure shall be classified as Income-producing real estate (IPRE) / \nCommercial Real Estate (CRE), if it results in the creation / acquisition of real \nestate (such as, office buildings to let, retail space, multifamily residential \nbuildings, industrial or warehouse space, and hotels) where the prospects for \nrepayment depend primarily on the cash flows generated by the asset itself. \nAdditionally, the prospect of recovery in the event of default would also depend \nprimarily on the cash flows generated from such funded asset which is taken \nas security, as would generally be the case. The primary source of cash flow \n(i.e., more than 50 per cent of cash flows) for repayment would generally be \nlease or rental payments or the sale of the assets as also for recovery in the \nevent of default where such asset is taken as security. \n \n(3) These guidelines shall also apply in cases where the exposure may not be \ndirectly linked to the creation or acquisition of CRE, but where the repayment \nis primarily dependent on cash flows generated by CRE. Examples include: \n(i) Exposures taken against existing CRE assets, whose repayments primarily \ndepend on rental / sale proceeds. \n(ii) Guarantees extended on behalf of companies engaged in CRE activities. \n(iii) Exposures on account of derivative transactions with real estate \ncompanies. \n(iv) Corporate loans to real estate companies. \n(v) Investments in equity or debt instruments of real estate companies.  \n(4) As follows from sub-paragraphs (2) and (3) above, if the repayment primarily \ndepends on other factors such as operating profit from business operations, \nquality of goods and services, tourist arrivals etc., the exposure shall not be \ncounted as CRE. \n126. The CRE exposures collateralized by eligible credit risk mitigants shall be \nreduced to the extent of risk mitigating effects of the collateral as per the provisions \nof Reserve Bank of India (Commercial Banks – Prudential Norms on Capital \nAdequacy) Directions, 2025. CRE exposures to the extent secured by Commercial \nReal Estate would attract a risk weight of 100%. In cases where a part of the CRE \nexposure is not covered by the security of commercial real estate, that part would"}
{"text": "attract a risk weight for CRE exposure or as warranted by the external rating of the \nborrower, whichever is higher. \nD. Simultaneous classification of CRE into other regulatory categories \n127. It is possible for an exposure to get classified simultaneously into more than \none category, as different classifications are driven by different considerations. In \nsuch cases, the exposure would be reckoned for regulatory/ prudential exposure \nlimit, if any, fixed by RBI or by the bank itself, for all the categories to which the \nexposure is assigned. For the purpose of capital adequacy, the largest of the risk \nweights applicable among all the categories would be applicable for the exposure. \nThe rationale for such an approach is that, while at times certain \nclassifications/categorizations could be driven by socio-economic considerations \nand may be aimed at encouraging flow of credit towards certain activities, these \nexposures should be subjected to appropriate risk management/prudential/capital \nadequacy norms so as to address the risk inherent in them. Similarly, if an \nexposure has sensitivity to more than one risk factor it should be subjected to the \nrisk management framework applicable to all the relevant risk factors.  \n128. Similarly, if an exposure is sensitive to multiple risk factors it shall be subjected \nto the risk management framework applicable to all the relevant risk factors. For \nexample: \n(1) Lending to Special Economic Zones (SEZs) qualifies as ‘Infrastructure \nLending’. However, if the SEZ exposure also meets the definition of CRE, it \nshall be classified under both categories. In such cases: \n(i) The risk weight applicable to CRE (100 per cent) shall be applied, regardless \nof borrower rating. \n(ii) At the same time, the exposure shall remain eligible for all regulatory \nconcessions extended to \"Infrastructure Lending.\"  \n(2) Investments in the equity of real estate companies, or Mutual Funds / Alternate \nInvestment Funds (AIFs) investing in the equity of real estate companies, \nwould be sensitive to movement in real estate prices, in addition to having a \ncorrelation with the general equity market. Accordingly, such exposures shall \nbe classified both as Capital Market Exposure (for compliance with regulatory \nceilings) and Real Estate Exposure (compliance with bank’s internal ceiling)."}
{"text": "These shall attract applicable risk weights for equity exposures or RW for \nexposures to AIFs, whichever is higher, if such risk weights are higher than the \nprescribed risk weight for CRE in terms of Reserve Bank of India (Commercial \nBanks – Prudential Norms on Capital Adequacy) Directions, 2025. The \nexposure shall also be reported to the Reserve Bank under both the \nclassifications with an appropriate footnote to avoid double counting. \n129. The bank shall apply the above principles to any other exposures involving \npotential dual classification, involving CRE exposures. \n130.  To enable the bank to classify exposures as CRE or otherwise, illustrative \nexamples are provided below. The bank shall apply the principles and examples \nto assess other cases and record a reasoned note justifying its classification. If in \ndoubt, the bank may refer the matter to the Department of Regulation with full \ndetails. \nIllustrative Examples \n(1) Exposures which shall be classified as CRE. \n(i) Loans extended to builders towards construction of any property \nwhich is intended to be sold or given on lease (e.g. loans extended to \nbuilders for housing buildings, hotels, restaurants, gymnasiums, \nhospitals, condominiums, shopping malls, office blocks, theatres, \namusement \nparks, \ncold \nstorages, \nwarehouses, \neducational \ninstitutions, industrial parks) \nIn such cases, the source of repayment in normal course shall be the cash \nflows generated by the sale / lease rentals of the property. In case of default \nof the loan, the recovery shall also be made from sale of the property if the \nexposure is secured by these assets as would generally be the case. \n(ii) Loans for multiple houses intended to be rented out \nThe housing loans extended in cases where houses are rented out need \nto be treated differently. As per Basel 2 Framework, loans secured by a \nsingle or small number of condominium or co-operative residential housing \nunits in a single building or complex also fall within the scope of the \nresidential mortgage category and national supervisors may set limits on \nthe maximum number of housing units per exposure. Therefore, such loans"}
{"text": "need not necessarily be classified as CRE Exposures. However, if the total \nnumber of such units is more than two, the exposure for the third unit \nonwards may be treated as CRE Exposure as the borrower may be renting \nthese housing units and the rental income would be the primary source of \nrepayment. \n(iii) Loans for integrated township projects \nWhere the CRE is part of a big project which has small non-CRE \ncomponent, it shall be classified as CRE exposure since the primary source \nof repayment for such exposures shall be the sale proceeds of buildings \nmeant for sale. \n(iv) Exposures towards development of SEZ \nBank finance for acquisition of land to private developers for setting up of \nSEZ is not permissible as per paragraph 98 of these Directions. The bank \nshall finance cost of land development, which shall be classified as CRE \nfor the reason that the source of repayment would be the lease rentals of \nthe developed plots / sheds. \nThe following, may however, be noted: \n(a) In cases where there are arrangements to insulate the lease rentals \nfrom volatility in the Real Estate prices by way of lease agreements for \nperiods not shorter than that of the loan and there is no clause which \nallows downward adjustment in the lease rentals, such cases shall not \nbe treated as CRE from the time such conditions get fulfilled. \n(b) Banks shall keep in mind the substance of the transaction rather \nthan the form. For example, it is possible that a SEZ may be \ndeveloped by a single company entirely or mainly for its own use. \nIn such cases the repayment shall depend on the cash flows \ngenerated by the economic activities of the units in the SEZ and \nthe general cash flow of the company rather than the level of real \nestate prices. It shall not then be classified as CRE. \n(c) There can be co-developers in an SEZ who undertake a specific \njob such as provision of sewerage, electrical lines etc. If their \nrepayment are not dependent on the cash flows generated by the \nCRE asset, such exposures shall not be classified as CRE. This"}
{"text": "illustratively would be the case where the co-developer is paid by \nthe main developer based on progress in work. \n(v) Exposures to real estate companies \nIn some cases exposure to real estate companies is not directly linked to \nthe creation or acquisition of CRE, but the repayment would come from the \ncash flows generated by CRE. Such exposures illustratively could be: \n(a) Corporate loans extended to these companies \n(b) Investments made in the equity / units / debt instruments of these \ncompanies \n(c) Extension of guarantees on behalf of these companies \n(d) Derivatives transactions entered into with these companies. \n(vi) Exposures to MFs / AIFs investing primarily in the real estate \ncompanies \nExposure to MFs / AIFs investing primarily in the real estate companies \nshall be classified as CRE exposure though the exposure would not be \ndirectly linked to the creation or acquisition of CRE, because the repayment \nwould come from the cash flows generated by CRE. \n(vii) General purpose loans where repayment is dependent on real estate \nprices \nExposures intended to be repaid out of rentals / sale proceeds generated \nby the existing CRE owned by the borrower, where the finance may have \nbeen extended for a general purpose. \n(2) Exposures which shall not be classified as CRE \n(i) Exposures to entrepreneurs for acquiring real estate for the purpose \nof their carrying on business activities, which shall be serviced out of \nthe cash flows generated by those business activities. The exposure \ncould be secured by the real estate where the activity is carried out, \nas would generally be the case, or could even be unsecured. \n(a) Loans extended for construction of a cinema theatre, establishment of \nan amusement park, hotels and hospitals, cold storages, warehouses, \neducational institutions, running haircutting saloons and beauty \nparlours, restaurant, gymnasium etc. to those entrepreneurs who"}
{"text": "themselves run these ventures shall fall in this category. Such loans \nwould generally be secured by these properties. \nFor instance, in the case of hotels and hospitals, the source of \nrepayment in normal course would be the cash flows generated by the \nservices rendered by the hotel and hospital. In the case of a hotel, the \ncash flows would be mainly sensitive to the factors influencing the flow \nof tourism, not directly to the fluctuations in the real estate prices. In the \ncase of a hospital, the cash flows in normal course would be sensitive \nto the quality of doctors and other diagnostic services provided by the \nhospital. In these cases, the source of repayment might also depend to \nsome extent upon the real estate prices to the extent the fluctuation in \nprices influence the room rents, but it shall be a minor factor in \ndetermining the overall cash flows. In these cases, however, the \nrecovery in case of default, if the exposure is secured by the CRE, shall \ndepend upon the sale price of the hotel / hospital as well as upon the \nmaintenance and quality of equipment and furnishings. \nThe above principle shall also be applicable in the cases where the \ndevelopers / owners of the real estate assets (hotels, hospitals, \nwarehouses, etc.) lease out the assets on revenue sharing or profit-\nsharing arrangement and the repayment of exposure depends upon \nthe cash flows generated by the services rendered, instead of fixed \nlease rentals. \n(b) Loans extended to entrepreneurs, for setting up industrial units shall \nalso fall in this category. In such cases, the repayment would be made \nfrom the cash flows generated by the industrial unit from sale of the \nmaterial produced which would mainly depend upon demand and \nsupply factors. The recovery in case of default may partly depend upon \nthe sale of land and building if secured by these assets. Thus, it shall \nbe seen that in these cases the real estate prices do not affect \nrepayment though recovery of the loan could partly be from sale of real \nestate. \n(ii) Loans extended to a company for a specific purpose, not linked to a \nreal estate activity, which is engaged in mixed activities including real \nestate activity."}
{"text": "A company has two divisions. One division is engaged in real estate \nactivity, and other division is engaged in power production. An \ninfrastructure loan, for setting up of a power plant extended to such a \ncompany, to be repaid by the sale of electricity shall not be classified as \nCRE. The exposure may or may not be secured by plant and machinery. \n(iii) Loans extended against the security of future rent receivables \nA few banks have formulated schemes where the owners of existing real \nestate such as shopping malls, office premises, etc. have been offered \nfinance to be repaid out of the rentals generated by these properties. Even \nthough such exposures do not result in funding / acquisition of CRE, the \nrepayment might be sensitive to fall in real estate rentals and as such \ngenerally such exposures shall be classified as CRE. However, if there are \ncertain in-built safety conditions which have the effect of delinking the \nrepayments from real estate price volatility like, the lease rental agreement \nbetween the lessor and lessee has a lock in period which is not shorter \nthan the tenor of loan and there is no clause which allows a downward \nrevision in the rentals during the period covered by the loan, the bank shall \nclassify such exposures as non CRE. The bank shall, however, record a \nreasoned note in all such cases. \n(iv) Credit facilities provided to construction companies which work as \ncontractors \nThe working capital facilities extended to construction companies working \nas contractors, rather than builders, shall not be treated as CRE exposures \nbecause the repayment would depend upon the contractual payments \nreceived in accordance with the progress in completion of work. \n(v) Financing of acquisition / renovation of self-owned office / company \npremises \nSuch exposures shall not be treated as CRE exposure because the \nrepayment will come from company revenues. \n(vi) Exposures towards acquisition of units / to industrial units in SEZs \n(a) Exposures towards acquisition of units in SEZ shall not be treated as \nCRE Exposures where there are restrictions on transfer of such units \nand require Government permission,  and speculative activity in sale \nand re-sale of units is unlikely to be there."}
{"text": "(b) The exposures to industrial units towards setting up of units or projects \nand working capital requirement, etc. shall not be treated as CRE \nExposures. \n(vii) Advances to Housing Finance Companies (HFCs) \nBanks’ advances to those HFCs, which are mostly lending to individuals \nfor residential housing as per the norms fixed by National Housing Bank \n(NHB) and also fulfil the eligibility criteria to draw refinance from NHB, shall \nnot be treated as CRE Exposure. \nE. Loans and Advances to Commercial Real Estate - Residential Housing \n131. Commercial Real Estate – Residential Housing (CRE-RH), has been carved \nout as a separate sub-sector from the broader CRE sector, in view of the lower \nrisk and volatility associated with residential housing projects, as compared to CRE \nSector taken as a whole. CRE-RH includes loans to builders / developers for \nresidential housing projects (except for captive consumption) under CRE segment. \nSuch projects shall generally not include non-residential commercial real estate. \nHowever, integrated housing projects comprising of some commercial space (e.g. \nshopping complex, school, etc.) may qualify as CRE-RH, provided that the \ncommercial area in the residential housing project does not exceed 10% of the \ntotal Floor Space Index (FSI) of the project. In case the FSI of the commercial area \nin the predominantly residential housing complex exceeds the ceiling of 10%, the \nproject loans shall be classified as CRE and not CRE-RH. \n132. The CRE-RH segment shall attract a lower risk weight of 75% and lower \nstandard asset provisioning of 0.75% as against 100% and 1.00%, respectively for \nthe CRE segment or as updated from time to time in terms of the provisions \ncontained in Reserve Bank of India (Commercial Banks – Prudential Norms on \nCapital Adequacy) Directions, 2025 and Reserve Bank of India (Commercial \nBanks – Income Recognition, Asset Classification and Provisioning) Directions, \n2025 respectively. \n133. The bank’s exposures to third dwelling unit onwards to an individual will also be \ntreated as CRE exposures, as indicated in paragraph 130(1)(ii) of these Directions."}
{"text": "Chapter IX - Infrastructure Financing \nA. Criteria for Financing \n134. The bank shall finance technically feasible, financially viable and bankable \ninfrastructure projects undertaken by both public sector and private sector \nundertakings subject to the following conditions: \n(1) The bank shall have the requisite expertise for appraising technical feasibility, \nfinancial viability and bankability of projects, with particular reference to the risk \nanalysis and sensitivity analysis. \n(2) In respect of projects undertaken by public sector units, term loans shall be \nsanctioned only for corporate entities (i.e. public sector undertakings registered \nunder Companies Act or a Corporation established under the relevant statute). \nFurther, such term loans shall not be in lieu of or to substitute budgetary \nresources envisaged for the project. The term loan could supplement the \nbudgetary resources if such supplementing was contemplated in the project \ndesign.  \n(3) While such public sector units may include Special Purpose Vehicles (SPVs) \nregistered under the Companies Act set up for financing infrastructure projects, \nit shall be ensured by the bank that these loans / investments are not used for \nfinancing the budget of the State Governments.  \n(4) Whether such financing is done by way of extending loans or investing in \nbonds, the bank shall undertake due diligence on the viability and bankability \nof such projects to ensure that revenue stream from the project is sufficient to \ntake care of the debt servicing obligations and that the repayment / servicing \nof debt is not out of budgetary resources.  \n(5) In the case of financing SPVs, banks and financial institutions shall ensure that \nthe funding proposals are for specific monitorable projects.  \n(6) The bank may also lend to SPVs in the private sector, registered under the \nCompanies Act for directly undertaking infrastructure projects which are \nfinancially viable and not for acting as mere financial intermediaries. The bank \nshall ensure that the bankruptcy or financial difficulties of the parent / sponsor \nshall not affect the financial health of the SPV."}
{"text": "B. Types of Financing by Banks \n135. In order to meet financial requirements of infrastructure projects, the bank shall \nextend credit facility by way of working capital finance, term loan, project loan, \nsubscription to bonds and debentures / preference shares / equity shares acquired \nas a part of the project finance package which is treated as \"deemed advance” \nand any other form of funded or non-funded facility. \n136. Take-out Financing \nThe bank shall be guided by the Reserve Bank of India (Commercial Banks – Transfer \nand Distribution of Credit Risk) Directions, 2025 for instruction related to take- out \nfinancing.  \n137. \n21[*****] \n137A. Lending to InvITs \nThe bank shall lend to InvITs subject to the following conditions: \n(1) A bank shall put in place a Board approved policy on exposures to InvITs which \nshall inter alia cover the appraisal mechanism, sanctioning conditions, internal \nlimits, monitoring mechanism, etc.  \n(2) Without prejudice to generality, a bank shall undertake assessment of all critical \nparameters including sufficiency of cash flows at InvIT level to ensure timely \ndebt servicing. The overall leverage of the InvITs and the underlying SPVs put \ntogether shall be within the permissible leverage as per the Board approved \npolicy of the bank.  A bank shall also monitor performance of the underlying \nSPVs on an ongoing basis as ability of the InvITs to meet their debt obligation \nwill largely depend on the performance of these SPVs. As InvITs are trusts, a \nbank shall keep in mind the legal provisions in respect of these entities \nespecially those regarding enforcement of security. \n(3) A bank shall lend to only those InvITs where none of the underlying SPVs, \nwhich have existing bank loans, is facing ‘financial difficulty’ as defined in the \n \n21 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) \nDirections, 2025.  \n(4) 22[Bank finance to InvITs for acquiring equity of other entities shall be subject \nto the relevant conditions given in Chapter XI – Acquisition Finance]. \n(5) The Audit Committee of the Board of the bank shall review the compliance to \nthe above conditions on a half yearly basis. \nC. Appraisal \n138. In respect of financing of infrastructure projects undertaken by Government \nowned entities, the bank shall undertake due diligence on the viability of the \nprojects. The bank shall ensure that the individual components of financing and \nreturns on the project are well defined and assessed. State Government \nguarantees shall not be taken as a substitute for satisfactory credit appraisal and \nsuch appraisal requirements shall not be diluted on the basis of any reported \narrangement with the Reserve Bank or any bank for regular standing instructions \n/ periodic payment instructions for servicing the loans / bonds. \n139. Infrastructure projects are often financed through Special Purpose Vehicles. \nFinancing of these projects shall, therefore, call for distinct appraisal methodology \non the part of lending agencies. Identification of various project risks, evaluation of \nrisk mitigation through appraisal of project contracts and evaluation of \ncreditworthiness of the contracting entities and their abilities to fulfil contractual \nobligations shall be an integral part of the appraisal exercise. In this connection, \nthe bank shall consider constituting appropriate screening committees / special \ncells for appraisal of credit proposals and monitoring the progress / performance \nof the projects. Often, the size of the funding requirement would necessitate joint \nfinancing by banks or financial institutions or financing by more than one bank \nunder consortium or syndication arrangements. In such cases, the participating \nbank shall, for the purpose of their own assessment, refer to the appraisal report \nprepared by the lead bank or financial institutions or have the project appraised \njointly. \n \n22  Modified with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "D. Prudential requirements \n140. For prudential credit exposure limits, the bank shall be guided by Reserve Bank \nof India (Commercial Banks – Concentration Risk Management) Directions, 2025\n \n \n \n \n. \n141. For assignment of risk weight for capital adequacy purposes, the bank shall be \nguided by the Reserve Bank of India (Commercial Banks – Prudential Norms on \nCapital Adequacy) Directions, 2025.  \n142. Asset-Liability Management \nThe long-term financing of infrastructure projects may lead to asset – liability \nmismatches, particularly when such financing is not in conformity with the maturity \nprofile of a bank’s liabilities. The bank shall, therefore, exercise due caution on their \nasset-liability position to ensure that they do not run into liquidity mismatches on \naccount of lending to such projects. \n143. Administrative arrangements \nTimely and adequate availability of credit is the pre-requisite for successful \nimplementation of infrastructure projects. The bank shall, therefore, clearly delineate \nthe procedure for approval of loan proposals and institute a suitable monitoring \nmechanism for reviewing applications pending beyond the specified period. \nMultiplicity of appraisals by every institution involved in financing, leading to delays, \nhas to be avoided and the bank shall be prepared to broadly accept technical \nparameters laid down by leading public financial institutions. Also, setting up a \nmechanism for an ongoing monitoring of the project implementation will ensure that \nthe credit disbursed is utilised for the purpose for which it was sanctioned."}
{"text": "Chapter X - Discounting / Rediscounting of Bills \nA bank shall adhere to the following guidelines while purchasing / discounting / \nnegotiating / rediscounting of genuine commercial / trade bills: \n144. A bank shall sanction working capital limits as also bills limit to borrowers, only \nafter proper appraisal of their credit needs and in accordance with the Board \napproved policy.  \n145. The procedure for Board approval shall include banks’ core operating process \nfrom the time the bills are tendered till these are realised. The bank shall review \ntheir core operating processes and simplify the procedure in respect of bills \nfinancing. In order to address the often-cited problem of delay in realisation of bills, \nthe bank shall utilize improved computer / communication networks like the \nStructured Financial Messaging system (SFMS) and adopt the system of ‘value \ndating’ of their clients’ accounts. \n146. A bank shall purchase / discount / negotiate bills under LCs only in respect of \ngenuine commercial and trade transactions of their borrower constituents who \nhave been sanctioned regular credit facilities by the banks. The bank shall not, \ntherefore, extend such facilities to non-constituent borrower or / and non-\nconstituent member of a consortium / multiple banking arrangement. However, in \ncases where negotiation of bills drawn under LC is restricted to a particular bank, \nand the beneficiary of the LC is not a constituent of that bank, the bank concerned \nmay negotiate such an LC, subject to the condition that the proceeds shall be \nremitted to the regular banker of the beneficiary. The prohibition regarding \nnegotiation of unrestricted LCs of non-constituents shall continue to be in force. \n147.  Sometimes, a beneficiary of the LC may want to discount the bills with the LC \nissuing bank itself. In such cases, the bank shall discount bills drawn by beneficiary \nonly if the bank has sanctioned regular fund- based credit facilities to the \nbeneficiary. With a view to ensuring that the beneficiary’s bank is not deprived of \ncash flows into its account, the beneficiaries should get the bills discounted / \nnegotiated through the bank with whom it is enjoying sanctioned credit facilities. \n148. Bills purchased / discounted / negotiated under LC (where the payment to the \nbeneficiary is not made ‘under reserve’) shall be treated as an exposure on the LC \nissuing bank and not on the borrower. All clean negotiations as indicated above"}
{"text": "shall be assigned the risk weight as is normally applicable to inter-bank exposures, \nfor capital adequacy purposes. In the case of negotiations ‘under reserve’, the \nexposure shall be treated as on the borrower and risk weight assigned accordingly. \nHowever, in cases where the bills discounting / purchasing / negotiating bank and \nLC issuing bank are part of the same bank, i.e. where LC is issued by the Head \nOffice or branch of the same bank, then the exposure shall be taken on the third \nparty / borrower and not on the LC issuing bank. \n149. While purchasing / discounting / negotiating bills under LCs or otherwise, banks \nshall establish genuineness of underlying transactions / documents. \n150. The bank shall ensure that blank LC forms are kept in safe custody as in case \nof security items like blank cheques, demand drafts etc. and verified / balanced on \ndaily basis. LC forms shall be issued to customers under joint signatures of the \nbank’s authorised officials. \n151. The practice of drawing bills of exchange claused ‘without recourse’ and issuing \nletters of credit bearing the legend ‘without recourse’ shall be discouraged because \nsuch notations deprive the negotiating bank of the right of recourse it has against \nthe drawer under the Negotiable Instruments Act. The bank shall negotiate bills \ndrawn under LCs, on either a ‘with recourse ‘or ‘without recourse ‘basis, based on \ntheir perception about the credit worthiness of the LC issuing bank. However, the \nbank shall not purchase / discount other bills (the bills not drawn under LC) on a \n‘without recourse ‘basis. \n152. The bank shall not purchase / discounted / negotiate accommodation bills. The \nunderlying trade transactions shall be clearly identified, and a proper record \nthereof maintained at the branches conducting the bills business. \n153. The bank shall be circumspect while discounting bills drawn by front finance \ncompanies set up by large industrial groups on other group companies. \n154. Bills rediscount shall be restricted to usance bills held by other banks. The bank \nshall not rediscount bills earlier discounted by non-bank financial companies \n(NBFCs) except in respect of bills arising from sale of light commercial vehicles \nand two / three wheelers. \n155. The bank shall exercise its commercial judgment in discounting of bills of the \nservices sector. However, while discounting such bills, the bank shall ensure that"}
{"text": "actual services are rendered, and accommodation bills are not discounted. \nServices sector bills shall not be eligible for rediscounting. Further, providing \nfinance against discounting of services sector bills shall be treated as unsecured \nadvance and, therefore, shall be within the norm prescribed by the Board of the \nbank for unsecured exposure limit. \n156. In order to promote payment discipline which would, to a certain extent, \nencourage acceptance of bills, all corporates and other constituent borrowers \nhaving turnover above threshold level as fixed by the bank’s Board of Directors \nshall be mandated to disclose ‘aging schedule’ of their overdue payables in their \nperiodical returns submitted to banks. \n157. The bank shall not enter into Repo transactions using bills discounted / \nrediscounted as collateral."}
{"text": "Chapter XI - Acquisition Finance \nA. 23[***** \n158. ***** \n159. ***** \n160. ***** \n161.  ***** \n162.  ***** \n163. *****  \n164.  ***** \n165.  ***** \nB. ***** \n166.  ***** \n167. *****  \n168. ***** \n169.  ***** \nC. ***** \n170. *****] \n24[ \n170A. Without prejudice to the provisions of Foreign Exchange Management Act, \n1999 and the rules and regulations framed thereunder, acquisition finance may be \nextended by a bank to an Indian non-financial company to acquire ‘control’, or  to \nincrease its stake towards acquiring ‘control’, over a domestic or foreign non-\nfinancial target company as strategic investment – i.e., an investment driven by the \n \n23 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n24 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "core objective of creating long-term value for the acquirer through potential \nsynergies, rather than mere financial restructuring for short-term gains. \n170B. In cases where acquiring control in a target company leads to control over \nmultiple companies due to control of such companies by the target company, the \ncriteria of potential synergy must be suitably assessed considering all such \ncompanies. \n Provided that, acquisition finance shall not be extended to an acquiring company \nfor acquisition of a non-financial target company, which has one or more financial \nentities as subsidiaries or Joint Ventures. \n170C. Acquisition finance may also be provided by banks to refinance existing \nacquisition debt of an acquiring company, subject to compliance with the provisions \nof these Directions and prudential requirements as specified in paragraph 6(12) of \nReserve Bank of India (Commercial Banks – Resolution of Stressed Assets) \nDirections, 2025, at the time of refinance. \n Provided that, refinance of acquisition finance can take place only when the \nacquisition finance has been concluded in all aspects, resulting in establishment of \ncontrol of the target company by the acquiring company. \nProvided further that, the refinance shall not be used for repayment of acquiring \ncompany’s contribution or for any purpose other than the retirement of the \nacquisition finance debt. \nD. Board approved policy \n170D. Banks shall put in place a Board approved policy on acquisition finance, suitably \nincorporating the underwriting benchmarks that address the structural complexities \nof such transactions, in particular relating to exposure limits, equity contribution, \nleverage multiples, and cash-flow certainty.  \nE. Eligible Entities and Conditions \n170E. Acquisition finance can be extended: \n(1) to the acquiring company for acquisition of target company directly by it; or"}
{"text": "(2) to the acquiring company, for on-lending to a non-financial subsidiary \nincorporated in India or overseas for acquisition of a target company by such \na subsidiary; or  \n \n \n(3) to an existing non-financial subsidiary of the acquiring company \nincorporated in India or overseas, on the strength of the acquiring company; \nor  \n(4) to a step-down special purpose vehicle (SPV) set up by the acquiring \ncompany singly or jointly with another non-financial company, in India or \noverseas specifically for the purpose, provided that the SPV has no \nbusiness purpose other than the acquisition and holding of the target. This \nshall be without prejudice to the extant norms relating to Core Investment \nCompanies.  \nProvided that, where the acquiring company holds less than a majority of voting \nrights in a SPV or its subsidiary through which acquisition is being done, \nacquisition finance shall be permitted only if: \n(a) the acquiring company holds the single largest voting block in the SPV or \nsubsidiary, as the case may be; and, \n(b) no other shareholder or group of shareholders acting in concert holds rights \nthat could override or veto the acquiring company's control over the SPV \nor subsidiary.  \n170F. Acquisition finance shall be subject to the following conditions: \n(1) Financial criteria of acquiring company:  \n170G. The acquiring company (or, where acquisition is through an SPV or subsidiary, \nthe acquiring company controlling such SPV or subsidiary) shall meet the following \nfinancial criteria at the time of sanctioning the acquisition finance: \n(i) \nIf listed on a recognized stock exchange in India: (a) Minimum net worth \nof ₹500 crore; and (b) Net profit after taxes reported in each of the \nprevious three consecutive financial years. \n(ii) \nIf unlisted: (a) Minimum net worth of ₹500 crore; (b) Net profit after taxes \nreported in each of the previous three consecutive financial years, and \n(c) an investment grade rating (BBB- or above) from a credit rating"}
{"text": "agency. If there is no rating available for the acquiring company at the \ntime of sanction, it shall have to be obtained prior to disbursement of \nacquisition finance.  \nExplanation: \n(i) \nThe above financial criteria of the acquiring company shall be examined \nat consolidated as well as standalone levels. \n(ii) \nNet Worth shall be computed in accordance to the provisions of Section \n2(57) of the Companies Act 2013. \n(2) Credit Assessment and Financing Conditions  \n170H. Credit assessment shall be conducted on a pro-forma consolidated basis, \nincorporating the financials of the acquiring company and the financials of the \ntarget company on a consolidated basis.  \n170I. Total bank financing shall not exceed 75 per cent of the acquisition value, as \nindependently assessed by the bank as under: \n(1) \nListed Company: Valuation as determined by one independent valuer (to \nbe appointed by the bank) as per para 8 (2) (e) of SEBI (Substantial \nAcquisition of Shares and Takeovers) Regulations, 2011 (‘SEBI SAST \nRegulations’) for valuing shares not frequently traded (using valuation \nparameters including, book value, comparable trading multiples, and such \nother parameters as are customary for valuation of shares of such \ncompanies); \n(2) \nUnlisted company: Lower of the valuation determined by two independent \nvaluers (to be appointed by the bank) as per para 8 (2) (e) of SEBI SAST \nRegulations, 2011 for valuing shares not frequently traded (using valuation \nparameters including, book value, comparable trading multiples, and such \nother parameters as are customary for valuation of shares of such \ncompanies). \n170J. The acquiring company must contribute the remaining amount out of its own \nfunds.  \nExplanation"}
{"text": "(i) \nOwn funds, for this purpose, shall mean funds demonstrably sourced from \nthe acquiring company's internal accruals, sale of assets or redemption of \ninvestments, or issuance of fresh equity.  \n(ii) \nProceeds of any borrowing; or any instrument that carries a fixed repayment \nobligation or a put option exercisable by the investor; or any intragroup \nfunding where the source entity has itself borrowed to make the contribution, \nshall not constitute own funds.  \nProvided that, the acquiring company, if listed, may utilise bridge finance to satisfy \nthe minimum own funds requirement, subject to the following: \na. \nthe repayment of the bridge finance must be only through internal accruals \nor an equity issue or asset sales, within a specified period (maximum 12 \nmonths).  \nb. \nif the bridge finance is provided by a bank, it shall be on a secured basis. \nc. \nBridge finance should not result in dilution of security coverage for the \nacquisition finance.   \n170K. A corporate guarantee from the acquiring company shall be mandatory in cases \nof acquisition finance extended to a subsidiary or an SPV of the acquiring \ncompany. \n170L. Post-acquisition, Debt to Equity ratio at the acquiring company’s consolidated \nbalance sheet level shall not exceed 3:1 on a continuous basis.  \n(3) Control acquisition requirements \n170M. The instruments through which such control is sought to be achieved may \ninclude equity shares, compulsorily convertible preference shares and \ncompulsorily convertible debentures conferring control over the target company.  \nProvided that, all debt claims of the acquiring company or its group entities on the \ntarget company shall rank subordinate to the claims of the bank(s) extending \nacquisition finance, for the full tenor of the credit facility. \n170N. Control may be established through a single transaction, or a series of inter-\nconnected transactions but completed within 12 months from the date of first \ndisbursal of the acquisition finance."}
{"text": "Provided that, where the acquiring company already holds control over the target \ncompany prior to seeking acquisition finance, acquisition finance may be extended \nonly for acquiring additional stake that crosses a substantial threshold of 26 per \ncent, 51 per cent, 75 per cent, 90 per cent of voting rights, each conferring \nmaterially enhanced governance or control rights under applicable law. \n(4) Related Party Restrictions:  \n170O. The acquiring company and the target company shall not be related parties, \nwhere \"related party\" means: \n(i) Entities having a relationship as defined under Section 2(76) of the \nCompanies Act, 2013; or \n(ii) Entities under common control, common management, or common \npromoter group, whether directly or indirectly. \nProvided that, the above restrictions shall not apply for financing acquisition of \nadditional stake as prescribed under proviso to 170N above. \nG. Security Creation and Valuation \n170P. A bank may determine the extent and nature of security cover for acquisition \nfinance.  \nProvided that, acquisition finance shall be secured by the financial instruments \nissued by the target company through which control over it is acquired by the \nacquiring company, without prejudice to the provisions of Section 19(2) of the BR \nAct 1949.  \nProvided further that, other unencumbered assets of the acquirer and/or target \ncompany, and promoter’s personal guarantee may be taken as additional collateral \nas per the bank’s policy.  \n170Q. Instruments acquired by the acquiring company as allowed in Paragraph 170M \nshall be free from any encumbrance. \nH. Other Conditions  \n170R. Acquisition finance undertaken by overseas branches of an Indian bank as part \nof syndication arrangements, shall not be subject to the Directions given in this \nchapter provided that, the funding contribution of a bank under such a syndication"}
{"text": "arrangement for a particular deal, across all its overseas branches, shall not \nexceed 20 per cent of total funding under the deal.   \n170S. Banks shall fix limits for their aggregate exposures towards acquisition finance \nwithin the regulatory limit as specified in Chapter V of the Reserve Bank of India \n(Commercial Banks – Concentration Risk Management) Directions, 2025.” \n]"}
{"text": "Chapter XII - Credit Facilities to Overseas Joint Ventures (JV) / Wholly Owned \nSubsidiaries Abroad and overseas Step-down Subsidiaries of Indian \nCompanies \n171. The bank may extend fund-based facilities to Indian Joint Ventures / Wholly–\nowned Subsidiaries abroad and Step-down subsidiaries which are wholly owned \nby overseas subsidiaries of Indian Corporates. The bank may also provide buyer’s \ncredit / acceptance finance to overseas parties for facilitating export of goods and \nservices from India. While extending such facilities banks should comply with the \nfollowing conditions: \n(1) Fund-based credit facilities shall be granted only to those joint ventures where \nthe holding by the Indian company is more than 51 per cent.  \n(2) Proper systems for management of credit and interest rate risks arising out of \nsuch cross- border lending are in place. \n(3) While extending such facilities, banks shall have to comply with Section 25 of \nthe Banking Regulation Act, 1949, in terms of which the assets in India of every \nquarter shall not be less than 75 per cent of its demand and time liabilities in \nIndia. \n(4) The resource base for such lending should be funds held in foreign currency \naccounts such as FCNR(B), EEFC, RFC, etc. in respect of which banks have \nto manage exchange risk. \n(5) Maturity mismatches arising out of such transactions are within the overall gap \nlimits approved by the Reserve Bank. \n(6) Adherence to all existing safeguards / prudential guidelines relating to capital \nadequacy, exposure norms etc. applicable to domestic credit / non- credit \nexposures. \n(7) The above exposure shall be subject to a limit of 20 per cent of banks' \nunimpaired capital funds (Tier I and Tier II capital). \n172. While extending fund-based facilities to step-down subsidiaries of overseas \nsubsidiaries of Indian Corporates, including to those beyond the first level, to \nfinance the projects undertaken abroad, it shall further be ensured that: \n(1) The immediate overseas subsidiary of the Indian company shall be directly \ncontrolled by the Indian parent company through any of the modes of control"}
{"text": "recognised under the Indian Accounting Standards. In addition, the Indian \nparent company must directly hold a minimum 51 per cent of its shareholding. \nExplanation: As per the Indian Accounting Standards, control has been defined \nas (a) the ownership, directly or indirectly, through subsidiary(ies), of more than \none-half of the voting power of an enterprise; or (b) control of the composition \nof the board of directors in the case of a company or of the composition of the \ncorresponding governing body in case of any other enterprise so as to obtain \neconomic benefits from its activities \n(2) All the step-down subsidiaries, including the intermediate ones, shall be wholly \nowned subsidiary of the immediate parent company or its entire shares shall \nbe jointly held by the immediate parent company and the Indian parent \ncompany and / or its wholly owned subsidiary. The immediate parent should, \nwholly or jointly with Indian parent company and / or its wholly owned \nsubsidiary, have control over the step-down subsidiary. \n(3) In addition to the stipulations above, for issuance of extension of any fund \nbased facilities to step-down subsidiaries of overseas subsidiaries of Indian \nCorporates, including to those beyond the first level, to finance the projects \nundertaken abroad, the banks shall further ensure that: \n(i) The setup of the step-down subsidiary shall be such that bank can \neffectively monitor the facilities granted by it. \n(ii) The bank shall make additional provision of two per cent (in addition to \ncountry risk provision that is applicable to all overseas exposures) against \nstandard assets representing all exposures to the step-down subsidiaries, \nto cover the additional risk arising from complexity in the structure, location \nof different intermediary entities in different jurisdictions exposing the \nIndian company, and hence the bank, to greater political and regulatory \nrisk. \n173. Further, the loan policy for such fund-based facility shall be, inter-alia, in \nkeeping with the following: \n(1) Grant of such loans is based on proper appraisal and commercial viability of \nthe projects and not merely on the reputation of the promoters backing the \nproject. Non-fund based facilities shall be subjected to the same rigorous \nscrutiny as fund-based limits."}
{"text": "(2) The countries where the joint ventures / wholly owned subsidiaries are located \nshall have no restrictions applicable to these companies in regard to obtaining \nforeign currency loans or for repatriation etc. and shall permit non-resident \nbanks to have legal charge on securities / assets abroad and the right disposal \nin case of need. \n174. The bank shall be guided by the Master Direction - External Commercial \nBorrowings, Trade Credits and Structured Obligations, for raising loans through \nECB towards repayment of rupee loans availed of from domestic banking system. \n175. For extension of non-fund based facilities, the bank shall be guided by Chapter \nXVI of these Directions."}
{"text": "Chapter XIII - Loans Against Financial Assets  \nA. 25[***** \n176. ***** \n177. ***** \n178. ***** \n179. ***** \nB. ***** \n180. *****  \n181. ***** \n182. ***** \n183. *****  \n184. *****   \n185. *****  \n186. ***** \nC. ***** \n187. ***** \n188. ***** \nD. ***** \n189. ***** \nE. ***** \n190. ***** \n191. ***** \n \n25 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "F. ***** \n192.  ***** \n193. *****  \nG. ***** \n194. ***** \n195. ***** \nH. *****  \n196. *****  \nI. \n***** \n197. ***** \nJ. ***** \n198. ***** \n199. ***** \nK. ***** \n200. ***** \nL. ***** \n201. ***** \n202. ***** \n203. ***** \n204. ***** \n205. ***** \n206. ***** \n207. ***** \n208. ***** \n209. ***** \n210. *****"}
{"text": "211. ***** \n212. ***** \n213. ***** \n214. *****] \nM. Advances against Fixed Deposit Receipts (FDRs)  \n215. The bank shall desist from sanctioning advances against FDRs or other term \ndeposits of other banks. \n216. Grant of advance against NR(E) and FCNR(B) deposits shall be subject to the \nguidelines issued under Foreign Exchange Management Act, 1999. \nN. 26[***** \n217. *****] \nO. Grant of Loans for acquisition of / investing in Small Saving Instruments \n218. The grant of loans for acquiring / investing in small saving schemes does not \npromote fresh savings and, rather, channelises the existing savings in the form of \nbank deposits to small savings instruments and thereby defeats the very purpose \nof such schemes. The bank shall, therefore, ensure that no loans are sanctioned \nfor acquisition of / investing in Small Savings Instruments including Kisan Vikas \nPatras. \nP. 27[***** \n219. *****] \n28[ \nQ. Loans against Eligible Securities \nQ.1 \nGeneral Conditions \n \n26 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n27 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n28 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"}
{"text": "219A. Banks may extend credit facilities against the collateral of eligible securities, as \npermitted in this chapter, as per their approved policy (hereinafter called the policy). \nThe policy shall, at the minimum, specify the criteria for selecting securities as \ncollateral; determining portfolio-level as well as single borrower/group borrower \nlimits; concentration limits for exposure to single securities; LTV/margins and \nhaircuts for different securities; and rules for ongoing valuation and margin calls.  \n219B. Notwithstanding the above, following loans by a bank shall not be permitted: \n(1) Loans against its own securities; \nProvided that, a bank may extend loans to individuals against Long-Term \nBonds issued by it for infrastructure financing under the provisions of the \nReserve Bank of India (Commercial Banks – Resource Raising Norms) \nDirections, 2025. The Board of the bank shall frame a policy in this regard, \nprescribing suitable margins, purpose of the loan, and other necessary \nsafeguards. Such loans shall be subject to a ceiling, say, ₹10 lakh per \nborrower; and tenure of the loan shall not exceed the maturity period of the \nunderlying bonds. It is also clarified that a bank shall not extend loans \nagainst such bonds issued by other banks. \nProvided further that, a bank may lend against CDs and buy back their own \nCDs where such CDs are held by mutual funds, subject to the provisions of \nparagraph 42 (1) of the SEBI (Mutual Funds) Regulations, 2026. Further, \nsuch finance if extended to equity-oriented mutual funds shall form part of \nbanks’ capital market exposure, as hitherto. \n(2) loans against partly paid shares;  \n(3) loans against securities which are under any lock-in requirements;  \n(4) loans against collateral of Indian Depository Receipts (IDRs); \n(5) loans against securities of such entities to which banks are not allowed to \ngrant loans and advances; \n(6) loans to companies for buy-back of shares/ securities as specified in \nparagraph 23 of Reserve Bank of India (Commercial Banks – Credit Risk \nManagement) Directions, 2025; \n(7) loans against Commercial Papers and Non-Convertible Debentures of \noriginal or initial maturity upto one year;"}
{"text": "219C. While undertaking lending activities under the provisions of this chapter, a bank \nshall: \n(1) put in place robust mechanisms to monitor end use of the funds. \n(2) stipulate suitable risk limits taking into account inter alia the liquidity, \nvolatility, and potential stress period corrections in the price of securities.  \n(3) ensure that the residual maturity of the securities initially taken as collateral, \nor subsequently substituted for the original collateral securities, is equal to \nor longer than the tenor of the loan.  \nExplanation: Condition of residual maturity is applicable in cases of non-\nperpetual securities. \n(4) ensure that provision of Section 19(2) of Banking Regulation Act, 1949 on \nholding of shares are adhered to.  \n(5) ensure that the prudential limits prescribed under these Directions are \nadhered to even when loans are extended to any of the joint holders of \nsecurities by treating the joint holders as availing proportionate amount of \nloan sanctioned to them jointly. \n(6) undertake the creation and invocation of pledge/hypothecation/lien against \nGovernment securities in terms of Section 28 of the Government Securities \nAct, 2006, Chapter VII of Government Securities Regulations, 2007; any \nother specific requirements as issued by the Government for such \nsecurities; and relevant guidelines issued by the Reserve Bank from time to \ntime.  \n(7) ensure that loans taken against Sovereign Gold Bond (SGB) are in terms of \nthe instructions specified in SGB notification issued by Government of India \nand the operational instructions relating to creation and invocation of \npledge/hypothecation/lien as per paragraph 11 of circular on ‘Sovereign \nGold Bond Scheme of the Government of India (GoI) – Procedural \nGuidelines – Consolidated’ dated October 22, 2021, as amended from time \nto time. \n219D. All exposures arising out of loans against eligible securities under this Chapter \nshall be included as CME, as specified in Reserve Bank of India (Commercial \nBanks - Concentration Risk Management) Directions, 2025, except wherever \nspecifically exempted."}
{"text": "Q.2 \nLending to Individuals \nQ.2.1 Scope \n219E. Loans to individuals, including Hindu Undivided Families (HUFs) which are not \ncommercial entities, shall be covered under this section. \n219F. Banks may lend to individuals against eligible securities, subject to the LTVs \nand prudential ceilings specified hereunder.  \nQ.2.2 LTV Requirements \n219G. Banks shall lay down the LTV for loans against eligible securities to individuals \nas per their credit policy, subject to the following ceilings: \nEligible Securities \nLTV Ceiling \nGovernment Securities (including T-Bills)  \nAs per bank’s policy  \nSovereign Gold Bonds (SGBs) \nAs applicable in case \nof loans against Gold \nand Silver Collateral \nListed shares and listed convertible debt \nsecurities \n60 per cent \nMutual Funds (excluding Debt MFs), Units of ETF \nand Units of REITs/InvITs \n75 per cent \nDebt Mutual Funds \n85 per cent \nListed Debt Securities with rating: \n           AAA  \nAA – BBB \n \n85 per cent \n75 per cent \n219H. LTV shall be monitored on an ongoing basis and a bank shall take steps to \nrectify the breaches immediately, but in no case later than seven working days from \nthe day of occurrence of such a breach.  \n219I. Valuation of securities taken as collateral, for the purpose of LTV shall be as \nper the following norms: \n(1) Valuation of debt securities shall be in terms of Reserve Bank of India \n(Commercial Banks – Classification, Valuation, and Operation of Investment \nPortfolio) Directions, 2025, as updated from time to time.  \n(2) Listed shares and units of mutual funds/ETFs/REIT/InvITs shall be valued \nat lower of the average daily closing prices/NAVs for the last six months or \nthe closing price/NAV of the previous trading day."}
{"text": "Q.2.3 Prudential Ceilings \n219J. Banks may fix their own prudential limits in terms of their approved policy for \nloans to individuals against collateral of Government securities (including T-Bills), \nlisted debt securities and units of debt mutual fund schemes. \nProvided that, during the tenor of the loan, if the credit rating of the particular \ndebt security is downgraded below BBB(-), banks shall ensure that those \nsecurities are replaced with any other eligible security within a period of thirty \nworking days, or proportionate portion of the exposure is repaid.  \n219K. The amount of loan from the banking system that can be granted to individuals \nagainst eligible securities, other than those mentioned in paragraph 219J above, \nshall be capped at ₹1 crore per individual.  \n219L. Within the above limits as prescribed in paragraphs 219J and 219K above, loan \nup to ₹25 lakh per individual may be granted for the purpose of acquisition of \nsecurities in secondary markets. \nQ.2.4 IPO/FPO/ESOP Financing \n219M. Banks may grant loans to individuals after ensuring due diligence for \nsubscribing to shares under initial public offer (IPO), follow-on public offer (FPO), \nor under employee stock option plan (ESOP) upto ₹25 lakh per individual at the \nbanking system level. \nProvided that the loan amount shall not exceed 75 per cent of the subscription \nvalue, i.e., borrowers shall contribute a minimum cash margin of 25 per cent. \nProvided further that no loan, whether secured or unsecured, shall be granted \nby a bank to its own employees or Employees’ Trust set up by the bank for \npurchasing its own Securities under IPOs/FPOs/ESOPs or from the secondary \nmarket. \n219N. It shall be ensured that a lien is created on the shares to be allotted under the \nIPOs/FPOs/ESOPs, and such shares shall be pledged to the lender upon \nallotment. \nQ.3 \nLending to non-individuals (other than CMIs) \nQ.3.1 Loans for General Business Purposes"}
{"text": "219O. A bank may provide finance, as per its approved policy, to non-financial entities \nagainst eligible securities, in addition to other collateral, for financing their working \ncapital or for other productive purposes. \nQ.3.2 Bridge Finance for Financing Promoter’s stake in New Companies \n219P. Banks may put in a Board approved policy, to provide bridge finance to non-\nfinancial corporates against the collateral of eligible securities held by them or \nimmovable properties for financing promoters’ stake for setting up new companies.   \n219Q. Such lending under paragraph 219O and 219P against eligible securities shall \nbe subject to the LTV ceiling as specified in paragraph 219G of these Directions. \nBanks shall ensure the end use of funds in all such cases is not used for \nspeculative purposes.  \nQ.3.3 Issue of Irrevocable Payment Commitments  \n219R. A custodian bank may issue Irrevocable Payment Commitments (IPCs) on \nbehalf of their clients, in favour of a Clearing Corporation of a Stock Exchange, \nsubject to meeting any one of the following conditions: \n(1) The IPC issuer bank has an agreement with its client which allows the bank \nan inalienable right over the securities to be received as pay out in any \nsettlement; or, \n(2) Such transactions are fully pre-funded i.e., either clear INR funds are \navailable in the customer’s account or, in case of FX deals involving FPIs, \nthe bank’s nostro account has been credited before the issuance of the IPC."}
{"text": "Chapter XIII A – Credit Facilities to Capital Market Intermediaries (CMIs) \nA. Scope \n219S. Provisions of this Chapter are applicable to lending to CMIs, as defined under \nthese Directions.  \nB. General Conditions \n219T. Credit facilities may be extended only to CMIs which are registered and \nregulated by a financial sector regulator and are in compliance with the prudential \nnorms prescribed by such regulator. \n219U. All exposures to CMIs shall be included as CME, except wherever specifically \nexempted. \n219V. Banks shall put in place counterparty as well as aggregate exposure limits for \nCMIs, within the overall prudential limits for CME, and relevant limits prescribed \nunder the Large Exposures Framework (LEF) and Intra-group transactions and \nexposures (ITE) in terms of Reserve Bank of India (Commercial Banks – \nConcentration Risk Management) Directions, 2025. \nC. Permissible and Prohibited Credit Facilities \n219W. A bank may provide need-based credit facilities to CMIs to fund their day-to-\nday operations, including general working capital facilities and specific facilities \nsuch as financing for margin trading undertaken by stockbrokers; overdraft/credit \nline facility to stockbrokers/commodity brokers/clearing members to meet \nsettlement related timing mismatches; and market making (for equity as well as \ndebt securities, including State and Central Government securities). \n219X. A bank may also issue guarantees on behalf of brokers or professional clearing \nmembers and in favour of exchanges or clearing houses, as applicable, in lieu of: \n(1) security deposit to the extent it is acceptable in the form of bank guarantee \nas laid down by stock exchanges; \n(2) margin requirements as per exchange regulations. \n219Y. Such guarantees shall be secured by a minimum collateral of 50 per cent, out \nof which 25 percent shall be in cash."}
{"text": "219Z. Banks shall not provide credit facilities to a CMI for acquisition of securities on \nits own account, including for proprietary trading or investments.  \nProvided that: \n(1) a bank may extend finance to approved market makers in equity and debt \nsecurities on a fully secured basis.   \n(2) a bank may provide working capital finance to a CMI for warehousing of \ndebt securities, including Government Securities, upto a maximum period \nof 45 days for fulfilling firm demand/request from its clients. Such financing \nshould be on fully secured basis with appropriate haircut on securities \npledged. \n(3) a bank may extend other working capital facilities against a 100 per cent \ncollateral of cash, cash equivalents and Government Securities (including \nT-Bills). \n219ZA. A bank may extend guarantees in terms of paragraph 219X for proprietary \ntrading by CMIs subject to the facility being fully secured by collateral of cash, cash \nequivalents and Government Securities (including T-Bills), out of which a minimum \n50 per cent shall be cash or fixed deposits maintained with the lending bank. Banks \nshould ensure through a proper mechanism that guarantees issued for non-\nproprietary purposes are not used to facilitate proprietary trading. \nD. \nSecurity Coverage \n219ZB. Without prejudice to paragraphs 219Z and 219ZA, all credit facilities to CMIs, \nincluding intraday facilities, unless otherwise stated, shall be provided on a fully \nsecured basis (i.e. 100 per cent collateral). Credit facilities to CMIs can be secured \nby eligible securities as defined in these Directions or other collaterals such as \ncash, other permissible financial assets (except Commercial Paper and Non-\nConvertible Debentures of original or initial maturity up to one year), immovable \nproperties, receivables, bank guarantees and standby letter of credit (SBLC). \nExplanation: Receivables in this context shall also include proceeds of cash \nand securities arising on account of a capital market transaction other than \nmargin trading facility (MTF) transactions.  \nProvided that:"}
{"text": "(1) In case of intra-day limits extended to CMIs, a relaxed minimum collateral \nrequirement of 50 per cent shall apply in case the intra-day limit is utilised \nfor meeting shortfall arising on account of settlement timing difference in \ncentrally cleared trades placed on behalf of clients, provided the CMI has \nexpected receivables from a QCCP fully covering such intra-day \ndrawdowns. \n(2) In respect of financing to brokers for margin trading facility (MTF) provided \nby them to their clients in terms of SEBI Regulations, the facility shall be fully \nsecured by collateral of cash, cash equivalents and Government Securities \n(including T-Bills) out of which a minimum 50 per cent shall be cash.  \n(3) A bank shall apply suitable haircuts to various types of primary securities \nand collateral securities, including eligible securities, subject to a minimum \nhaircut of 40 per cent in case of equity shares.  \n219ZC. In terms of para 414 of ‘Chapter XVI - Non-Fund Based (NFB) Credit Facilities’ \nof these Directions, banks cannot issue guarantee favouring another RE to enable \nit to provide any fund-based credit facility to an obligor. Notwithstanding this \nprovision, counter-guarantees issued by other Indian banks and SBLCs issued by \nforeign banks of repute, including foreign parent bank of a CMI, may also be \nconsidered as eligible non-cash collateral wherever allowed for the purpose of this \nChapter. Provided that this shall be without prejudice to the extant FEMA \nregulations. \n219ZD. The collateral cover, as applicable, shall be maintained on an ongoing basis \nand the facility agreements shall have explicit provisions for margin calls in the \nevent of shortfalls.  \n219ZE. A bank shall ensure that the collaterals placed for such financing generally \nbelong to the borrower CMI. Collateral belonging to a group entity/promoter of the \nCMI may also be accepted, provided it is unencumbered, exclusively charged for \nthis facility and legally enforceable. \n]"}
{"text": "Chapter XIV - Finance to Non-Banking Financial Companies (NBFCs) \nBackground: Consistent with the policy of bestowing greater operational freedom to \nbanks in the matter of credit dispensation and in the context of mandatory registration \nof NBFCs with the Reserve Bank, most of the aspects relating to financing of NBFCs \nby banks have also been deregulated. However, in view of the sensitivities attached \nto financing of certain types of activities undertaken by NBFCs, restrictions on \nfinancing of such activities continue to be in force. In this context, NBFCs mean the \nNon-Banking Financial Companies registered with the Reserve Bank of India, which \nshall also include a Housing Finance Company (HFC) registered under Section 29A \nof the National Housing Bank Act, 1987. \nA. Finance to NBFCs registered with RBI \n220. The ceiling on bank credit linked to Net Owned Fund (NOF) of NBFCs has been \nwithdrawn in respect of all NBFCs which are statutorily registered with the Reserve \nBank and are engaged in principal business of asset financing, loan, factoring and \ninvestment activities. Accordingly, the bank shall extend need based working \ncapital facilities as well as term loans to all NBFCs registered with the Reserve \nBank and engaged in infrastructure financing, equipment leasing, hire-purchase, \nloan, factoring and investment activities subject to provisions of paragraph 232 of \nthese Directions. \n221. In the light of the experience gained by NBFCs in financing second hand assets, \nthe bank shall also extend finance to NBFCs against second hand assets financed \nby them. \n222. The bank shall formulate suitable loan policy with the approval of their Boards \nof Directors within the prudential guidelines and exposure norms prescribed by the \nReserve Bank to extend various kinds of credit facilities to NBFCs subject to the \ncondition that the activities indicated in paragraphs 224, 225, 228, 229 and 230 \nare not financed by them. \nB. Finance to NBFCs not requiring Registration \n223. In terms of Reserve Bank of India (Non-Banking Financial Companies – \nRegistration, Exemptions and Framework for Scale Based Regulation) Directions, \n2025, a few categories of NBFCs are exempted from certain provisions of the"}
{"text": "Reserve Bank of India Act, 1934, including the need for registration with the \nReserve Bank. For such NBFCs which do not need registration with the Reserve \nBank, the bank shall take its credit decisions on the basis of usual factors like the \npurpose of credit, nature and quality of underlying assets, repayment capacity of \nborrowers as also risk perception, etc. Further, while financing NBFCs, which do \nnot require registration with RBI, banks shall also refer to the guidelines / \nnotifications issued in this regard from time to time by the Ministry of Corporate \nAffairs, Government of India. \nC. Activities not eligible for Bank Credit \n224. The following activities undertaken by NBFCs, are not eligible for bank credit: \n(1) Bills discounted / rediscounted by NBFCs, except for rediscounting of bills \ndiscounted by NBFCs arising from sale of - \n(i) commercial vehicles (including light commercial vehicles), and \n(ii) two-wheeler and three-wheeler vehicles, subject to the following conditions: \n(a) the bills shall be drawn by the manufacturer on dealers only; \n(b) the bills shall represent genuine sale transactions as may be \nascertained from the chassis / engine number; and \n(c) before rediscounting the bills, the bank shall satisfy themselves about \nthe bona fides and track record of NBFCs which have discounted the \nbills. \n(2) Investments of NBFCs both of current and long-term nature, in any company / \nentity by way of shares, debentures, etc. However, Stock Broking Companies \nshall be provided need-based credit against shares and debentures held by \nthem as stock-in- trade. \nIn this context, current investments mean the investments classified in the \nbalance sheet of the borrower as 'current assets' and are intended to be held \nfor less than one year and long term investments mean all types of investments \nother than that classified as 'current assets'. \n(3) Unsecured loans / inter-corporate deposits by NBFCs to / in any company. \nIn this context, unsecured loans mean the loans not secured by any tangible \nasset."}
{"text": "(4) All types of loans and advances by NBFCs to their subsidiaries, group \ncompanies / entities. \n(5) Finance to NBFCs for further lending to individuals for subscribing to Initial \nPublic Offerings (IPOs) and for purchase of shares from secondary market. \n225. Leased and Sub-Leased Assets \nAs banks can extend financial assistance to equipment leasing companies, they shall \nnot enter into lease agreements departmentally with such companies as well as other \nNBFCs engaged in equipment leasing. \nD. Finance to Factoring Companies \n226. Notwithstanding the restrictions mentioned at paragraph 224, the bank may \nextend financial assistance to support the factoring business of Factoring \nCompanies, viz., ‘NBFC-Factors’ and ‘NBFC-ICCs holding certificate of \nregistration under the Factoring Regulation Act, 2011’, subject to the following \nconditions: \n(1) The companies qualify as factoring companies; and carry out their business \nunder the provisions of the Factoring Regulation Act, 2011 and Notifications \nissued by the Reserve Bank in this regard from time to time. \n(2) The financial assistance extended by the Factoring Companies is secured by \nhypothecation or assignment of receivables in their favour. \n227. In addition to the above, NBFC-Factors must also satisfy the following criteria \nto be eligible for bank finance - \n(1) They derive at least 50 per cent of their income from factoring activity. \n(2) The receivables purchased / financed, irrespective of whether on 'with \nrecourse' or 'without recourse' basis, form at least 50 per cent of their assets. \n(3) The assets / income referred to at (1) and (2) above shall not include the assets \n/ income relating to any bill discounting facility extended by them. \nE. Other Prohibitions on Finance to NBFCs \n228. Bridge loans / interim finance \nThe bank shall not grant bridge loans of any nature, or interim finance against \ncapital / debenture issues and / or in the form of loans of a bridging nature pending \nraising of long-term funds from the market by way of capital, deposits, etc. to all"}
{"text": "categories of NBFCs. The bank shall strictly follow these instructions and ensure \nthat they are not circumvented in any manner whatsoever by purport and / or intent \nby sanction of credit under a different nomenclature like unsecured negotiable \nnotes, floating rate interest bonds, etc., as also short-term loans, the repayment of \nwhich is proposed / expected to be made out of funds to be or likely to be mobilised \nfrom external / other sources and not out of the surplus generated by the use of \nthe asset(s). \n229. Advances against collateral security of shares to NBFCs \nShares and debentures shall not be accepted as collateral securities for secured \nloans granted to NBFC borrowers for any purpose. \n230. Restriction on guarantees for placement of funds with NBFCs \nThe bank shall comply with the provisions of Chapter XVI of these Directions \nregarding restrictions on issuing guarantees for placement of funds with NBFCs or \nother non-bank entities. \nF. Other Instructions \n231. For prudential ceilings for exposure to NBFCs, the bank shall be guided by the \ninstructions contained in the Reserve Bank of India (Commercial Banks – \nConcentration Risk Management) Directions, 2025. \n232. For restrictions regarding investments made by the bank in securities / \ninstruments issued by NBFCs, it shall be guided by the instructions contained in \nthe Reserve Bank of India (Commercial Banks – Classification, Valuation and \nOperation of Investment Portfolio) Directions, 2025. \n233. For risk weights for bank credit to NBFCs, the bank’s exposure to NBFCs shall \nbe subject to capital charge as per the Risk Weight prescribed in Reserve Bank of \nIndia (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, \n2025."}
{"text": "Chapter XV - Export Credit \nBackground: The Reserve Bank first introduced the scheme of Export Financing in \n1967. The scheme is intended to make short-term working capital finance available \nto exporters at internationally comparable interest rates. Export credit is available \nboth in Rupee as well as in foreign currency.  \nA. Rupee Pre-shipment Credit / Packing Credit \nA.1  \nPeriod of Advance \n234. The period of a packing credit advance shall be determined by the bank based \non the specific circumstances of each case, including the time required for \nprocuring, manufacturing or processing (as applicable) and shipping the relative \ngoods / rendering of services. The banks shall ensure that the sanctioned period \nis sufficient to enable the exporter to ship the goods / render the services within a \nreasonable timeframe. \n235. If pre-shipment advances are not adjusted by submission of export documents \nwithin 360 days from the date of advance, the advances shall cease to qualify for \nexport credit to the exporter ab initio. \nA.2  \nDisbursement of Packing Credit \n236. Generally, each packing credit sanctioned shall be maintained as separate \naccount for the purpose of monitoring the period of sanction and end-use of funds. \n237. The bank shall release the packing credit in one lump sum or in stages as per \nthe requirement for executing the orders / LC. \n238. The bank shall maintain separate accounts for different stages of processing, \nmanufacturing etc., depending on the types of goods / services to be exported \n(e.g., hypothecation, pledge). The bank shall ensure that the outstanding balance \nin accounts are adjusted by transfer from one account to the other and finally by \nproceeds of relative export documents on purchase, discount, etc.  \n239. The bank shall also monitor the progress made by the exporters in timely \nfulfilment of export orders."}
{"text": "A.3  \nLiquidation of Packing Credit \n240. The packing credit / pre-shipment credit granted to an exporter shall be \nliquidated out of proceeds of bills drawn for the exported commodities on its \npurchase, discount etc., thereby converting pre-shipment credit into post-shipment \ncredit. Further, subject to mutual agreement between the exporter and the banker \nit can also be repaid / prepaid out of balances in Exchange Earners Foreign \nCurrency A/c (EEFC A/c) as also from Rupee resources of the exporter to the \nextent exports have actually taken place. \n241. Packing credit in excess of export value \n(1) Where by-product can be exported \n(2) Where the exporter is unable to tender export bills of equivalent value for \nliquidating the packing credit due to the shortfall on account of wastage \ninvolved in the processing of agro products like raw cashew nuts, etc., the bank \nshall allow exporters, inter alia, to extinguish the excess packing credit by \nexport bills drawn in respect of by-product like cashew shell oil, etc. \n(3) Where partial domestic sale is involved \n(4) In respect of export of agro-based products like tobacco, pepper, cardamom, \ncashew nuts etc., the exporter has to necessarily purchase a somewhat larger \nquantity of the raw agricultural produce and grade it into exportable and non- \nexportable varieties and only the former is exported. The non-exportable \nbalance is necessarily sold domestically. For the packing credit covering such \nnon-exportable portion, the bank shall charge the rate of interest applicable to \nthe domestic advance from the date of advance of packing credit. \n(5) Export of deoiled / defatted cakes \n(6) The bank shall grant packing credit advance to exporters of HPS groundnut \nand deoiled / defatted cakes to the extent of the value of raw materials required \neven though the value thereof exceeds the value of the export order. The \nadvance in excess of the export order shall be adjusted either in cash or by \nsale of residual by-product oil within a period not exceeding 30 days from the \ndate of advance. \n242. The bank shall, however, have operational flexibility to extend the following \nrelaxations to their exporter clients who have a good track record:"}
{"text": "(1) Repayment / liquidation of packing credit with proceeds of export documents \nshall; continue; however, this shall be with export documents relating to any \nother order covering the same or any other commodity exported by the \nexporter. While allowing substitution of contract in this way, the bank shall \nensure that it is commercially necessary and unavoidable. The bank shall also \nsatisfy itself about the valid reasons as to why packing credit extended for \nshipment of a particular commodity cannot be liquidated in the normal method. \nAs far as possible, the substitution of contract shall be allowed if the exporter \nmaintains account with the same bank or it has the approval of the members \nof the consortium, if any. \n(2) The existing packing credit shall also be marked-off with proceeds of export \ndocuments against which no packing credit has been drawn by the exporter. \nHowever, it is possible that the exporter might avail of EPC with one bank and \nsubmit the documents to another bank. In view of this possibility, the bank shall \nextend such facility after ensuring that the exporter has not availed of packing \ncredit from another bank against the documents submitted. If any packing \ncredit has been availed of from another bank, the bank to which the documents \nare submitted shall ensure that the proceeds are used to liquidate the packing \ncredit obtained from the first bank. \n(3) These relaxations shall not be extended to transactions of sister / associate / \ngroup concerns. \nA.4  \n'Running Account' Facility \n243. The pre-shipment credit to exporters is normally provided on lodgement of LCs \nor firm export orders. However, due to certain reasons such as (i) seasonal \navailability of raw materials, and (ii) time required for manufacture and shipment of \ngoods exceeding the delivery schedule under export contracts, the exporters may \nneed to procure raw material, manufacture goods, and keep them ready for \nshipment in anticipation of receipt of letters of credit / firm export orders from the \noverseas buyers. In view of the foregoing, a bank may extend Pre-shipment Credit \n‘Running Account’ facility in respect of any commodity, without insisting on prior \nlodgement of letters of credit / firm export orders, depending on its judgement \nregarding the need to extend such a facility and subject to the following conditions:"}
{"text": "(1) ‘Running Account’ facility can be extended only to those exporters whose track \nrecord has been good as also to Export Oriented Units (EOUs) / Units in Free \nTrade Zones / Export Processing Zones (EPZs) and Special Economic Zones \n(SEZs). \n(2) In all cases where Pre-shipment Credit ‘Running Account’ facility has been \nextended, letters of credit / firm orders shall be produced within a reasonable \nperiod of time to be decided by the bank. \n(3) The bank shall mark off individual export bills, as and when they are received \nfor negotiation / collection, against the earliest outstanding pre-shipment credit \non 'First In First Out' (FIFO) basis. Needless to add that, while marking off the \npre-shipment credit in the manner indicated above, banks shall ensure that \nexport credit available in respect of individual pre-shipment credit does not go \nbeyond the period of sanction or 360 days from the date of advance, whichever \nis earlier. \n(4) Packing credit shall also be marked-off with proceeds of export documents \nagainst which no packing credit has been drawn by the exporter. \n244. If it is noticed that the exporter is found to be misusing the facility, the facility \nshall be withdrawn forthwith. \n245. In cases where exporters have not complied with the terms and conditions, the \nadvance shall not be treated as export credit ab initio. \n246. Running account facility shall not be granted to sub-suppliers. \nA.5  \nExport Credit against proceeds of cheques, drafts, etc. representing \nadvance payment for exports \n247. Where exporters receive direct remittances from abroad by means of cheques, \ndrafts etc. in payment for exports, the bank shall grant export credit to exporters of \ngood track record till the realisation of proceeds of the cheque, draft etc. received \nfrom abroad, after satisfying itself that it is against an export order, is as per trade \npractices in respect of the goods in question and is an approved method of \nrealisation of export proceeds as per extant rules."}
{"text": "B. Rupee Pre-shipment Credit to specific sectors / segments \nB.1  \nRupee Export Packing Credit to manufacturer suppliers for exports \nrouted through STC / MMTC / Other Export Houses, Agencies etc. \n248. The bank may grant export packing credit to manufacturer suppliers who do not \nhave export orders / letters of credit in their own name and goods are exported \nthrough the State Trading Corporation / Minerals and Metal Trading Corporation \nor other export houses, agencies etc. \nB.2  \nRupee Export Packing Credit to Sub-Suppliers \n249. Packing credit may be shared between an Export Order Holder (EOH) and sub-\nsupplier of raw materials, components etc. of the exported goods as in the case of \nEOH and manufacturer suppliers, subject to the following: \n(1) Running Account facility is not contemplated under the scheme. The scheme \nshall cover the LC or export order received in favour of Export Houses / Trading \nHouses / Star Trading Houses etc. or manufacturer exporters only. The \nscheme shall be made available to the exporters with good track record. \n(2) Banker to an EOH shall open an inland LC specifying the goods to be supplied \nby the sub-supplier to the EOH against the export order or LC received by it as \na part of the export transaction. On the basis of such a LC, the sub-supplier's \nbanker shall grant EPC as working capital to enable the sub-supplier to \nmanufacture the components required for the goods to be exported. On \nsupplying the goods, the LC opening bank shall pay to the sub-supplier's \nbanker against the inland documents received on the basis of inland LC. Such \npayments will thereafter become the EPC of the EOH. \n(3) It is up to the EOH to open any number of LCs for the various components \nrequired with the approval of his banker / leader of consortium of banks within \nthe overall value limit of the order or LC received by him. Taking into account \nthe operational convenience, it is for the LC opening bank to fix the minimum \namount for opening such LCs. The total period of packing credit availed by the \nsub-supplier(s), individually or severally and the EOH shall be within normal \ncycle of production required for the exported goods. Normally, the total period \nwill be computed from the date of first drawal of packing credit by any one of \nthe sub-suppliers to the date of submission of export documents by EOH."}
{"text": "(4) The EOH shall be responsible for exporting the goods as per export order or \noverseas LC and any delay in the process will subject it to the penal provisions \nissued from time to time. Once the sub-supplier makes available the goods as \nper inland LC terms to the EOH, its obligation of performance under the \nscheme shall be treated as complied with and the penal provisions shall not \nbe applicable to him for delay by EOH, if any. \n(5) The scheme is an additional window besides the existing system of sharing of \npacking credit between EOH and manufacturer in respect of exported goods \nas detailed in paragraph  248 above. The scheme shall cover only the first \nstage of production cycle. For example, a manufacturer exporter shall be \nallowed to open domestic LC in favour of his immediate suppliers of \ncomponents etc. that are required for manufacture of exportable goods. The \nscheme shall not be extended to cover suppliers of raw materials / components \netc. to such immediate suppliers. In case the EOH is merely a trading house, \nthe facility shall be available commencing from the manufacturer to whom the \norder has been passed on by the Trading House. \n(6) EOUs / EPZ / SEZ units supplying goods to another EOU / EPZ / SEZ unit for \nexport purposes are also eligible for rupee pre-shipment export credit under \nthis scheme. However, the supplier EOU / EPZ / SEZ unit shall not be eligible \nfor any post-shipment facility as the scheme does not cover sale of goods on \ncredit terms. \n(7) The scheme does not envisage any change in the total quantum of advance or \nperiod. Accordingly, the credit extended under the system shall be treated as \nexport credit from the date of advance to the sub-supplier to the date of \nliquidation by EOH under the inland export LC system and up to the date of \nliquidation of packing credit by shipment of goods by EOH. It shall be ensured \nthat no double financing of the same leg of the transaction is involved. \n(8) The bank shall approach the ECGC for availing suitable cover in respect of \nsuch advances. \n(9) The scheme does not envisage extending credit by a sub-supplier to the EOH \n/ manufacturer and thus, the payment to sub-suppliers shall be made against \nsubmission of documents by LC opening bank treating the payment as EPC of \nthe EOH."}
{"text": "B.3  \nRupee Pre-shipment Credit to Construction Contractors \n250. The packing credit advances to the construction contractors to meet their initial \nworking capital requirements for execution of contracts abroad shall be made on \nthe basis of a firm contract secured from abroad, in a separate account, on an \nundertaking obtained from them that the finance is required by them for incurring \npreliminary expenses in connection with the execution of the contract e.g., for \ntransporting the necessary technical staff and purchase of consumable articles for \nthe purpose of executing the contract abroad, etc. \n251. The advances shall be adjusted within 365 days from the date of advance by \nnegotiation of bills relating to the contract or by remittances received from abroad \nin respect of the contract executed abroad.  \n252. The exporters undertaking project export contracts including export of services \nmay comply with the guidelines / instructions issued by Foreign Exchange \nDepartment of the Reserve Bank from time to time. \nB.4  \nExport of Services \n253. Pre-shipment and post-shipment finance shall be provided to exporters of all \nthe tradable services covered under the General Agreement on Trade in Services \n(GATS) and earning free foreign exchange as per the extant Foreign Trade Policy \nof Government of India. All provisions of this circular shall apply mutatis mutandis \nto export of services as they apply to export of goods unless otherwise specified.  \n254. The financing bank shall ensure that there is no double financing and the export \ncredit is liquidated with remittances from abroad. The bank shall take into account \nthe track record of the exporter / overseas counter party while sanctioning the \nexport credit.  \n255. The statement of export receivables from such service providers shall be tallied \nwith the statement of payables received from the overseas party. \n256. The bank shall formulate their own parameters to finance the service exporters. \n257. Exporters of services qualify for working capital export credit (pre and post \nshipment) for consumables, wages, supplies etc. The bank shall ensure the \nfollowing: \n(1) The proposal is a genuine case of export of services."}
{"text": "(2) The exporter is registered with the Electronic and software EPC or Services \nEPC or with Federation of Indian Export Organisations, as applicable. \n(3) There is an Export Contract for the export of the service. \n(4) There is a time lag between the outlay of working capital expense and actual \nreceipt of payment from the service consumer or his principal abroad. \n(5) There is a valid Working Capital gap i.e. service is provided first while the \npayment is received some time after an invoice is raised. \n(6) The bank shall ensure that there is no double financing / excess financing. \n(7) The export credit granted does not exceed the foreign exchange earned less \nthe margins if any required, advance payment / credit received. \n(8) Invoices are raised. \n(9) Inward remittance is received in Foreign Exchange. \n(10) Company shall raise the invoice as per the contract. Where payment is \nreceived from overseas party, the service exporter shall utilize the funds to \nrepay the export credit availed of from the bank. \nB.5  \nPre-shipment Credit to Floriculture, Grapes and Other Agro-based \nProducts \n258. Floriculture and other agro-based exports shall also qualify for export credit. \nHowever, the bank shall ensure that the activities are not covered by direct / \nindirect finance schemes of NABARD or any other agency. \n259. Export credit shall not be extended for investments, such as, import of foreign \ntechnology, equipment, land development etc. or any other item which cannot be \nregarded as working capital. \nB.6  \nExport Credit to Processors / Exporters - Agri-Export Zones \n260. Government of India has set up Agri-Export Zones in the country to promote \nAgri Exports. Agri- Export Oriented Units (processing) are set up in Agri- Export \nzones as well as outside the zones and to promote such units, production and \nprocessing are to be integrated. The producer has to enter into contract farming \nwith farmers and has to ensure supply of quality seeds, pesticides, micro-nutrients \nand other material to the group of farmers from whom the exporter shall be \npurchasing the products as raw material for production of the final products for \nexport. The Government, therefore, suggested that such export processing units"}
{"text": "may be provided packing credit under the extant guidelines for the purpose of \nprocuring and supplying inputs to the farmers so that quality inputs are available \nto them which in turn will ensure that only good quality crops are raised. The \nexporters will be able to purchase / import such inputs in bulk, which will have the \nadvantages of economies of scale. \n261. The bank shall treat the inputs supplied to farmers by exporters as raw material \nfor export and consider sanctioning the lines of credit / export credit to processors \n/ exporters to cover the cost of such inputs required by farmers to cultivate such \ncrops to promote export of agri products. The processor units shall be able to effect \nbulk purchases of the inputs and supply the same to the farmers as per a pre- \ndetermined arrangement. \n262. The bank shall ensure that the exporters have made the required arrangements \nwith the farmers and overseas buyers in respect of crops to be purchased and \nproducts to be exported respectively. The financing bank shall also appraise the \nprojects in agri export zones and ensure that the tie-up arrangements are feasible \nand projects would take off within a reasonable period of time. \n263. The bank shall also monitor the end-use of funds, viz. distribution of the inputs \nby the exporters to the farmers for raising the crops as per arrangements made by \nthe exporter / main processor units. \n264. The bank shall ensure that the final products are exported by the processors / \nexporters as per the terms and conditions of the sanction in order to liquidate the \npre-shipment credit as per extant instructions. \nC. Rupee Post-Shipment Export Credit \nC.1  \nPeriod of Realisation of Export Proceeds \n265. The period of realization of export proceeds is determined by Foreign Exchange \nDepartment of the Reserve Bank. The bank shall adhere to the direction issued \nunder Foreign Exchange Management Act, 1999, as amended from time to time. \nC.2  \nTypes of Post-shipment Credits \n266. Post-shipment advance shall mainly take the form of: \n(1) Export bills purchased / discounted / negotiated. \n(2) Advances against bills for collection."}
{"text": "(3) Advances against duty drawback receivable from Government. \nC.3  \nLiquidation of Post-shipment Credit \n267. Post-shipment credit is to be liquidated by the proceeds of export bills received \nfrom abroad in respect of goods exported / services rendered. Further, subject to \nmutual agreement between the exporter and the banker it can also be repaid / \nprepaid out of balances in Exchange Earners Foreign Currency Account (EEFC \nA/C) as also from proceeds of any other unfinanced (collection) bills. Such \nadjusted export bills shall however continue to be followed up for realization of the \nexport proceeds and shall continue to be reported in the Export Data Processing \nand Monitoring System (EDPMS). \n268. In order to reduce the cost to exporters (i.e. interest cost on overdue export \nbills), exporters with overdue export bills may extinguish their overdue post \nshipment rupee export credit from their rupee resources. However, the \ncorresponding Export Declaration Form will remain outstanding and the amount \nshall be shown outstanding in EDPMS. The exporter’s liability for realisation shall \ncontinue till the export bill is realised. \nC.4  \nPeriod of Rupee Post-Shipment Export Credit \n269. In the case of demand bills, the period of advance shall be the Normal Transit \nPeriod (NTP) as specified by FEDAI. \n270. In case of usance bills, credit shall be granted for a maximum duration of 365 \ndays from date of shipment inclusive of Normal Transit Period (NTP) and grace \nperiod, if any. However, the bank shall closely monitor the need for extending post-\nshipment credit up to the permissible period of 365 days and it shall persuade the \nexporters to realise the export proceeds within a shorter period. \nC.5  \nAdvances against Undrawn Balances on Export Bills \n271. In respect of export of certain commodities where exporters are required to \ndraw the bills on the overseas buyer up to 90 to 98 per cent of the FOB value of \nthe contract, the residuary amount being 'undrawn balance' is payable by the \noverseas buyer after satisfying himself about the quality / quantity of goods."}
{"text": "272. Payment of undrawn balance is contingent in nature. The bank shall consider \ngranting advances against undrawn balances based on their commercial \njudgement and the track record of the buyer. \nC.6  \nAdvances against Retention Money \n273. In the case of turnkey projects / construction contracts, progressive payments \nare made by the overseas employer in respect of services segment of the contract, \nretaining a small percentage of the progressive payments as retention money \nwhich is payable after expiry of the stipulated period from the date of the \ncompletion of the contract, subject to obtention of certificate(s) from the specified \nauthority. \n274. Retention money may also be stipulated against the supply portion of turn-key \nprojects or sub-contracts. The bank shall treat retention money as a deferred \nliability, given its contingent nature.  \n275. Advances shall not be granted against retention money relating to services \nportion of the contract. \n276. Exporters shall be advised to arrange, as far as possible, provision of suitable \nguarantees, instead of retention money. \n277. The bank shall consider, on a selective basis, granting of advances against \nretention money relating to the supply portion of the contract taking into account, \namong others, the size of the retention money accumulated, its impact on the liquid \nfunds position of the exporter and the past performance regarding the timely \nreceipt of retention money. \n278. The payment of retention money shall be secured by LC or Bank Guarantee \nwhere possible. \n279. Where the retention money is payable after a period of one year from the date \nof shipment, according to the terms of the contract and the corresponding advance \nis extended for a period exceeding one year, it shall be treated as post-shipment \ncredit given on deferred payment terms exceeding one year, and the bank is free \nto decide the rate of interest."}
{"text": "C.7  \nExport on Consignment Basis \n280. Export on consignment basis lends scope for a lot of misuse in the matter of \nrepatriation of export proceeds. Therefore, export on consignment basis shall be \nat par with exports on outright sale basis on cash terms in matters regarding the \nrate of interest to be charged by banks on post-shipment credit.  \n281. Export of precious and semi-precious stones \nPrecious and semi-precious stones, etc. are exported mostly on consignment \nbasis and the exporters are not in a position to liquidate pre-shipment credit \naccount with remittances received from abroad within a period of 365 days from \nthe date of advance. The bank shall, therefore, adjust packing credit advances in \nthe case of consignment exports, as soon as export takes place, by transfer of the \noutstanding balance to a special (post-shipment) account which in turn, shall be \nadjusted as soon as the relative proceeds are received from abroad but not later \nthan 365 days from the date of export or such extended period as may be permitted \nby Foreign Exchange Department of the Reserve Bank. \nC.8  \nExport of Goods for Exhibition and Sale \n282. The bank shall provide finance to exporters against goods sent for exhibition \nand sale abroad in the normal course in the first instance, and after the sale is \ncompleted, allow the benefit of rate of interest on such advances, if any, both at \nthe pre-shipment stage and at the post-shipment stage, up to the stipulated \nperiods, by way of a rebate. Such advances shall be given in separate accounts. \nC.9  \nPost-shipment Advances against Duty Drawback Entitlements \n283. The bank shall grant post-shipment advances to exporters against their duty \ndrawback entitlements and covered by ECGC guarantee as provisionally certified \nby Customs Authorities pending final sanction and payment. \n284. The advance against duty drawback receivables shall also be made available \nto exporters against export promotion copy of the shipping bill containing the EGM \nNumber issued by the Customs Department. Where necessary, the financing bank \nshall have its lien noted with the designated bank and arrangements shall be made \nwith the designated bank to transfer funds to the financing bank as and when duty \ndrawback is credited by the Customs."}
{"text": "C.10  ECGC Post-shipment Guarantee Scheme \n285. The bank shall, in the interest of export promotion and credit risk mitigation, \nconsider opting for export credit insurance products offered by ECGC Ltd. The \nsalient features of the scheme, Export Credit Insurance for Banks (ECIB), may be \nobtained directly from ECGC Ltd. \nAs the post-shipment guarantee mainly benefits the banks, the cost of premium \nmay be borne by the banks and not passed on to the exporters. \n286. However, even where the post-shipment credit is insured under an ECGC \npolicy, the bank shall not dilute their efforts towards realisation of their dues against \nlong outstanding export bills. \nC.11  Export Credit - DTA to SEZ Units \n287. As per the extant Foreign Trade Policy, goods and services going to Special \nEconomic Zone area (SEZ) from Domestic Tariff Area (DTA) shall be treated as \nexports. Accordingly, the supply of goods and services from DTA to Special \nEconomic Zone area would be eligible for export credit facilities. \nD. Deemed Exports - Rupee Export Credit \n288. The bank shall extend rupee pre-shipment and post-shipment export credit to \nparties against orders for supplies in respect of projects aided / financed by \nbilateral or multilateral agencies / funds (including World Bank, IBRD, IDA), as \nnotified from time to time by Department of Economic Affairs, Ministry of Finance \nunder the Section \"Deemed Exports\" in Foreign Trade Policy, which are eligible \nfor grant of normal export benefits by Government of India. \n289. Packing Credit provided shall be adjusted from free foreign exchange \nrepresenting payment for the suppliers of goods to these agencies. It shall also be \nrepaid / prepaid out of balances in Exchange Earners Foreign Currency account \n(EEFC A/c), as also from the rupee resources of the exporter to the extent supplies \nhave actually been made. \n290. The bank shall also extend rupee  \n(1) pre-shipment credit, and  \n(2) post-supply credit (for a maximum period of 30 days or up to the actual date of \npayment by the receiver of goods, whichever is earlier),"}
{"text": "for supply of goods specified as 'Deemed Exports' under the same Section of \nForeign Trade Policy from time to time. \nE. Interest on Rupee Export Credit \n291. The bank shall determine interest rate on rupee export credit (pre-shipment \ncredit and post-shipment credit) as per the policy approved by their Board, subject \nto the regulatory provisions contained in the Reserve Bank of India (Commercial \nBanks – Interest Rates on Advances) Directions, 2025.  \n292. If pre-shipment advances are not liquidated from proceeds of bills on purchase, \ndiscount, etc. on submission of export documents within 360 days from the date \nof advance, or as indicated at paragraph 235 of these Directions, the advances \nshall not be treated as export credit ab initio. \n293. If exports do not materialise at all, the bank shall charge on relative packing \ncredit domestic lending rate plus penal charges, if any, to be decided by the bank \non the basis of a transparent policy approved by their Board. \nF. Pre-shipment Credit in Foreign Currency (PCFC) \nF.1  \nGeneral Provisions \n294. With a view to making credit available to exporters at internationally competitive \nrates, authorised dealers have been permitted to extend pre-shipment Credit in \nForeign Currency (PCFC) to exporters for domestic and imported inputs of \nexported goods at Alternative Reference Rate in the currency concerned. \n295. The scheme is an additional window for providing pre-shipment credit to Indian \nexporters at internationally competitive rates of interest. It shall be applicable to \nonly cash exports. The instructions with regard to Rupee Export Credit shall apply \nto export credit in Foreign Currency mutatis mutandis, unless otherwise specified. \n296. The exporter shall have the following options to avail of export finance: \n(1) to avail of pre-shipment credit in rupees and then the post-shipment credit \neither in rupees or discounting / rediscounting of export bills under EBR \nScheme mentioned in paragraph 340  to 364 of these Directions. \n(2) to avail of pre-shipment credit in foreign currency and discount / rediscounting \nof the export bills in foreign currency under EBR Scheme."}
{"text": "(3) to avail of pre-shipment credit in rupees and then convert drawal into PCFC at \nthe discretion of the bank. \n297. Choice of currency \n(1) The facility shall be extended in one of the convertible currencies viz. US \nDollars, Pound Sterling, Japanese Yen, Euro, etc. \n(2) To enable the exporters to have operational flexibility, it shall be in order for \nbanks to extend PCFC in one convertible currency in respect of an export order \ninvoiced in another convertible currency. For example, an exporter can avail of \nPCFC in US Dollar against an export order invoiced in Euro. The risk and cost \nof cross currency transaction shall be that of the exporter. \n(3) The bank shall extend PCFC for exports to ACU countries. \n(4) The applicable benefit to the exporters shall accrue only after the realisation of \nthe export bills or when the resultant export bills are rediscounted on ‘without \nrecourse’ basis. \nF.2  \nSource of funds for banks \n298. The foreign currency balances available with the bank in Exchange Earners \nForeign Currency (EEFC) Accounts, Resident Foreign Currency Accounts RFC(D) \nand Foreign Currency (Non-Resident) Accounts (Banks) Scheme may be utilised \nfor financing the pre-shipment credit in foreign currency. \n299. The bank shall also utilise the foreign currency balances available under \nEscrow Accounts and Exporters Foreign Currency Accounts for the purpose, \nsubject to ensuring that the requirements of funds by the account holders for \npermissible transactions are met and the limit prescribed for maintaining maximum \nbalance in the account under broad based facility is not exceeded. \n300. Foreign currency borrowings \n(1) In addition, the bank may arrange for borrowings from abroad. The bank shall \nnegotiate lines of credit with overseas banks for the purpose of grant of PCFC \nto exporters without the prior approval of the Reserve Bank. \n(2) The bank shall avail of lines of credit from other banks in India if they are not in \na position to raise loans from abroad on their own, provided the bank does not \nhave a branch abroad. The spread between the borrowing and lending bank is \nleft to the discretion of the banks concerned."}
{"text": "(3) The bank shall draw on the line of credit arranged only to the extent of loans \ngranted by them to the exporters under the PCFC. However, where the \noverseas bank making available the line of credit stipulates a minimum amount \nfor drawals which shall not be very large, the small unutilised portion shall be \nmanaged by the bank within its foreign exchange position and Aggregate Gap \nLimit (AGL). Similarly, any pre-payment by the exporter shall also be taken \nwithin the foreign exchange position and AGL limits. \n301. In case the exporters have arranged for the suppliers’ credit for procuring \nimported inputs, the PCFC facility shall be extended by the banks only for the \npurpose of financing domestic inputs for exports. \n302. The bank shall use foreign currency funds borrowed in terms of Notification No. \nFEMA.3(R)/2018-RB dated December 17, 2018  as also foreign currency funds \ngenerated through buy-sell swaps in the domestic forex market for granting pre-\nshipment credit in Foreign Currency (PCFC) subject to adherence to Aggregate \nGap Limit (AGL) in terms of Master Direction - Risk Management and Inter-Bank \nDealings. \nF.3  \nInterest on Export Credit in Foreign Currency \n303. The bank is free to determine interest rates on export credit in foreign currency \nusing any widely accepted Alternative Reference Rate (ARR) in the currency \nconcerned, in accordance with their Board-approved policy and subject to the \nrelevant guidelines contained in the Reserve Bank of India (Commercial Banks – \nInterest Rates on Advances) Directions, 2025, or any other applicable direction / \ncircular. \nF.4  \nPeriod of credit \n304. The PCFC shall be available for a maximum period of 360 days. Any extension \nof the credit shall be subject to the same terms and conditions as applicable for \nextension of rupee packing credit. \n305. Further extension shall be subject to the terms and conditions fixed by the bank \nconcerned and if no export takes place within 360 days, the PCFC shall be \nadjusted at T.T. selling rate for the currency concerned. In such cases, the bank \nshall arrange to remit foreign exchange to repay the loan or line of credit raised \nabroad and interest without prior permission of the Reserve Bank."}
{"text": "F.5  \nExport Credit in Foreign Currency to Protect Exporters from Rupee \nFluctuations \n306. Banks extend export credit in Indian Rupees as well as in foreign currency, \nsuch as Pre-Shipment Credit in Foreign Currency (PCFC) and Post Shipment \nCredit in Foreign Currency (PSCFC), as per their own internal lending policy within \nthe overall regulatory framework prescribed by the Reserve Bank. \n307. The export credit limits are calculated in Indian Rupees and the limit is \napportioned between Rupee and foreign currency components depending upon \nthe borrowers' requirement. While the overall export credit limits are fixed in Indian \nRupees, the foreign currency component of export credit fluctuates based on the \nprevailing exchange rates. \n308. It is observed that whenever there is a depreciation of Indian Rupee : \n(1) the unavailed foreign currency component of export credit gets reduced; \n(2) the foreign currency component of export credit already availed gets revalued \nat a higher value in terms of Indian Rupees resulting in the exporter being \nasked to reduce their exposure by part payment or where the export credit limit \nis not fully disbursed, the available limit for the borrower reduces, depriving \nexporter of funds. \n309. The bank shall consider denominating export credit facilities in foreign currency \nto ensure that exporters are not adversely impacted by Rupee fluctuations. \n310. The bank shall compute the overall export credit limits of the borrowers on an \nongoing basis say monthly, based on the prevalent position of current assets, \ncurrent liabilities and exchange rates and re-allocate limit towards export credit in \nforeign currency, as per the bank's own policy. This may result in increasing or \ndecreasing the Indian Rupee equivalent of foreign currency component of export \ncredit. \n311. Alternatively, the bank shall denominate foreign currency (FC) component of \nexport credit in foreign currency only with a view to ensuring that the exporters are \ninsulated from Rupee fluctuations. The FC component of export credit, sanctioned, \ndisbursed and outstanding will be maintained and monitored in FC. However, for \ntranslation of FC assets in the banks' book, the bank shall refer to Reserve Bank"}
{"text": "of India (Commercial Banks – Financial Statements: Presentation and \nDisclosures) Directions, 2025. \nF.6  \nDisbursement of PCFC \n312. In case full amount of PCFC or part thereof is utilised to finance domestic input, \nthe bank shall apply appropriate spot rate for the transaction. \n313. As regards the minimum lots of transactions, it is left to the operational \nconvenience of the bank to stipulate the minimum lots taking into account the \navailability of its own resources. However, while fixing the minimum lot, the bank \nshall take into account the needs of their small customers also. \n314. The bank shall take steps to streamline their procedures so that no separate \nsanction is needed for PCFC once the packing credit limit has been authorised \nand the disbursement is not delayed at the branches. \nF.7  \nLiquidation of PCFC Account \n315. PCFC shall be liquidated out of proceeds of export documents on their \nsubmission for discounting / rediscounting under the EBR Scheme as detailed in \nparagraphs 340 to 364 of these Directions or by grant of foreign currency loans \n(DP Bills). Subject to mutual agreement between the exporter and the banker, it \nshall also be repaid / prepaid out of balances in EEFC A/c as also from rupee \nresources of the exporter to the extent exports have actually taken place. \n316. Packing credit in excess of F.O.B. value \nIn certain cases, (viz. agro based products like HPS groundnut, defatted & deoiled \ncakes, tobacco, pepper, cardamom, cashew nuts, etc.) where packing credit \nrequired is in excess of FOB value, PCFC shall be available only for exportable \nportion of the produce. \n317. Substitution of order / commodity \nRepayment / liquidation of PCFC shall be with export documents relating to any \nother order covering the same or any other commodity exported by the exporter or \namount of balance in the EEFC Account. While allowing substitution of contract in \nthis way, the bank shall ensure that it is commercially necessary and unavoidable. \nThe bank shall also satisfy about the valid reasons as to why PCFC extended for \nshipment of a particular commodity cannot be liquidated in the normal method. As"}
{"text": "far as possible, the substitution of contract shall be allowed if the exporter \nmaintains account with the same bank or it has the approval of the members of \nthe consortium, if any. \nF.8  \nCancellation / non-execution of export order \n318. In case of cancellation of the export order for which the PCFC was availed of \nby the exporter from the bank, or if the exporter is unable to execute the export \norder for any reason, the exporter may repay the loan together with accrued \ninterest thereon, by purchasing foreign exchange (principal + interest) from \ndomestic market through the bank.  \n319. It shall also be in order for the bank to remit the amount to the overseas bank, \nprovided the PCFC was made available to exporter from the line of credit obtained \nfrom that bank. \n320. The bank shall extend PCFC to such exporters subsequently, after ensuring \nthat the earlier cancellation of PCFC was due to genuine reasons. \nF.9  \nRunning Account Facility for all commodities \n321. The bank shall extend the ‘Running Account’ facility under the PCFC Scheme \nto exporters for all commodities, on the lines of the facility available under rupee \ncredit, subject to the following conditions: \n(1) The facility shall be extended provided the need for ‘Running Account’ facility \nhas been established by the exporters to the satisfaction of the bank. \n(2) The bank shall extend the facility only to those exporters whose track record \nhas been good. \n(3) In all cases, where pre-shipment credit ‘Running Account’ facility has been \nextended, the LCs or firm orders shall be produced within a reasonable period \nof time. \n(4) The PCFC shall be marked-off on the ‘First-in-First-Out’ basis. \n(5) PCFC shall also be marked-off with proceeds of export documents against \nwhich no PCFC has been drawn by the exporter. \n322. The bank shall closely monitor the production of firm order or LC subsequently \nby exporters and also the end-use of funds. It shall be ensured that no diversion \nof funds is made for domestic use. In case of non-utilisation of PCFC drawals for"}
{"text": "export purposes, the penal provisions stated above shall be made applicable and \nthe ‘Running Account’ facility shall be withdrawn for the concerned exporter. \n323. The bank shall take any prepayment by the exporter under PCFC scheme \nwithin their foreign exchange position and Aggregate Gap Limit (AGL) as indicated \nin paragraph 300(3) of these Directions. With the extension of ‘Running Account’ \nfacility, mismatches are likely to occur for a longer period involving cost to the \nbanks. The bank shall charge the exporters the funding cost, if any, involved in \nabsorbing mismatches in respect of the prepayment beyond one month period. \nF.10  Forward Contracts \n324. In terms of paragraph 297 of these Directions, PCFC can be extended in any \nof the convertible currencies in respect of an export order invoiced in another \nconvertible currency. The bank shall also allow an exporter to book forward \ncontract on the basis of confirmed export order prior to availing of PCFC and \ncancel the contract (for portion of drawal used for imported inputs) at prevailing \nmarket rates on availing of PCFC. \n325. The bank shall allow customers to seek cover in any permitted currency of their \nchoice which is actively traded in the market, subject to ensuring that the customer \nis exposed to exchange risk in a permitted currency in the underlying transaction. \n326. While allowing forward contracts under the scheme, banks shall ensure \ncompliance of the basic Foreign Exchange Management requirement that the \ncustomer is exposed to an exchange risk in the underlying transaction at different \nstages of the export finance. \nF.11  Sharing of EPC under PCFC \n327. The rupee export packing credit may be shared between an export order holder \nand the manufacturer of the goods to be exported. Similarly, the bank shall extend \nPCFC also to the manufacturer on the basis of the disclaimer from the export order \nholder through its bank. \n328. PCFC granted to the manufacturer can be repaid by transfer of foreign currency \nfrom the export order holder by availing of PCFC or by discounting of bills. The \nbank shall ensure that no double financing is involved in the transaction and the"}
{"text": "total period of packing credit is limited to the actual cycle of production of the \nexported goods. \n329. The facility shall be extended where the banker or the leader of consortium of \nbanks is the same for both the export order holder and the manufacturer or, the \nbanks concerned agree to such an arrangement where the bankers are different \nfor export order holder and manufacturer. The sharing of export benefits shall be \nleft to the mutual agreement between the export order holder and the \nmanufacturer. \nF.12  Supplies from One EOU/EPZ/SEZ Unit to another EOU/EPZ/SEZ Unit \n330. PCFC shall be made available to both, the supplier EOU / EPZ / SEZ unit and \nthe receiver EOU / EPZ / SEZ unit. \n331. The PCFC for supplier EOU / EPZ / SEZ unit shall be for supply of raw materials \n/ components of goods which will be further processed and finally exported by \nreceiver EOU / EPZ / SEZ unit. \n332. The PCFC extended to the supplier EOU / EPZ / SEZ unit shall have to be \nliquidated by receipt of foreign exchange from the receiver EOU / EPZ / SEZ unit, \nfor which purpose, the receiver EOU / EPZ / SEZ unit may avail of PCFC. \n333. The stipulation regarding liquidation of PCFC by payment in foreign exchange \nshall be met in such cases not by negotiation of export documents but by transfer \nof foreign exchange from the banker of the receiver EOU / EPZ / SEZ unit to the \nbanker of supplier EOU / EPZ / SEZ unit. Thus, there shall not normally be any \npost-shipment credit in the transaction from the supplier EOU / EPZ / SEZ unit’s \npoint of view. \n334. In all such cases, it shall be ensured by banks that there is no double financing \nfor the same transaction. Needless to add, the PCFC to receiver EOU / EPZ / SEZ \nunit shall be liquidated by discounting of export bills. \nF.13  Deemed Exports \n335. PCFC shall be allowed for ‘deemed exports’ only for supplies to projects \nfinanced by multilateral / bilateral agencies / funds. PCFC released for ‘deemed \nexports’ shall be liquidated by grant of foreign currency loan at post-supply stage, \nfor a maximum period of 30 days or up to the date of payment by the project"}
{"text": "authorities, whichever is earlier. PCFC shall also be repaid / prepaid out of \nbalances in EEFC A/c as also from rupee resources of the exporter to the extent \nsupplies have actually been made. \nF.14  Other aspects \n336. The applicable benefits such as credit of eligible percentage of export proceeds \nto EEFC Account etc. to the exporters shall accrue only after realisation of the \nexport bills and not at the stage of conversion of pre-shipment credit to post-\nshipment credit (except when bills are discounted / rediscounted 'without \nrecourse'). \n337. For the purpose of reckoning the bank’s performance in extending export credit, \nthe rupee equivalent of the PCFC shall be taken into account. \nF.15  Diamond Dollar Account (DDA) Scheme \n338. In terms of the extant Foreign Trade Policy, firms / companies dealing in \npurchase / sale of rough or cut and polished diamonds, diamond studded jewellery, \nwith good track record of at least two years in import or export of diamonds with \nan annual average turnover of ₹3 crore or above during the preceding three \nlicensing years (from April to March) are permitted to carry out their business \nthrough designated Diamond Dollar Accounts (DDAs). \n339. Under the DDA Scheme, the bank shall liquidate PCFC granted to DDA holders \nby dollar proceeds from sale of rough, cut and polished diamonds by them to other \nDDA holders. (For details regarding the Diamond Dollar Accounts, bank may refer \nto Foreign Exchange Management (Foreign currency accounts by a person \nresident in India) Regulations, 2015, issued by FED vide Notification No. FEMA 10 \n(R) /2015-RB dated January 21, 2016, as amended from time to time. \nG. Post-shipment Credit in Foreign Currency: Rediscounting of Export Bills \nAbroad Scheme (EBR) \n340. The bank shall utilise the foreign exchange resources available with it in \nExchange Earners Foreign Currency Accounts (EEFC), Resident Foreign \nCurrency Accounts (RFC), Foreign Currency (Non-Resident) Accounts (Banks) \nScheme, to discount usance bills and retain them in their portfolio without resorting"}
{"text": "to rediscounting. The bank can rediscount export bills abroad at rates linked to \ninternational interest rates at post- shipment stage. \nG.1  \nScheme \n341. It will be comparatively easier to have a facility against bills portfolio (covering \nall eligible bills) than to have rediscounting facility abroad on bill-by-bill basis. \nThere shall, however, be no bar if rediscounting facility on bill-to-bill basis is \narranged by a bank in case of any particular exporter, especially for large value \ntransactions. \n342. The bank shall arrange a \"Bankers Acceptance Facility\" (BAF) for rediscounting \nthe export bills without any margin and duly covered by collateralised documents. \n343. Each bank can have its own BAF limit(s) fixed with an overseas bank or a \nrediscounting agency or an arrangement with any other agency such as factoring \nagency (in case of factoring arrangement, it shall be on ‘without recourse’ basis \nonly). \n344. The exporters, on their own, can arrange for themselves a line of credit with an \noverseas bank or any other agency (including a factoring agency) for discounting \ntheir export bills direct subject to the following conditions: \n(1) Direct discounting of export bills by exporters with overseas bank and / or any \nother agency shall be done only through the branch of an authorized dealer \ndesignated by them for this purpose. \n(2) Discounting of export bills shall be routed through designated bank / authorized \ndealer from whom the packing credit facility has been availed of. In case, these \nare routed through any other bank, the latter will first arrange to adjust the \namount outstanding under packing credit with the concerned bank out of the \nproceeds of the rediscounted bills. \n345. The limits granted to banks by overseas banks / discounting agencies under \nBAF shall not be reckoned for the purpose of borrowing limits fixed by Foreign \nExchange Department of the Reserve Bank for them. \nG.2  \nEligibility criteria \n346. The Scheme shall cover mainly export bills with usance period up to 180 days \nfrom the date of shipment (inclusive of normal transit period and grace period, if"}
{"text": "any). There is, however, no bar to include demand bills, if overseas institution has \nno objection to it. \n347. In case borrower is eligible to draw usance bills for periods exceeding 180 days \nas per the extant instructions of Foreign Exchange Department, Post-shipment \nCredit under the EBR shall be provided beyond 180 days. \n348. The facility under the Scheme of Rediscounting shall be offered in any \nconvertible currency. \n349. The bank can extend the EBR facility for exports to ACU countries. \n350. For operational convenience, the BAF Scheme shall be centralised at a branch \ndesignated by the bank. There shall, however, be no bar for other branches of the \nbank to operate the scheme as per the bank's internal guidelines / instructions. \nG.3  \nSource of On-shore funds \n351. In the case of demand bills [subject to paragraph 346 of these Directions], these \nshall be routed through the existing post-shipment credit facility or by way of \nforeign exchange loans to the exporters out of the foreign currency balances \navailable with banks in the Schemes ibid. \n352. To facilitate the growth of local market for rediscounting export bills, \nestablishment and development of an active inter-bank market is desirable. It is \npossible that the bank holds bills in their own portfolio without rediscounting. \nHowever, in case of need, the bank shall also have access to the local market, \nwhich will enable the country to save foreign exchange to the extent of the cost of \nrediscounting. Further, as different banks may be having BAF for varying amounts, \nit shall be possible for a bank which has balance available in its limit to offer \nrediscounting facility to another bank which may have exhausted its limit or could \nnot arrange for such a facility. \n353. The bank shall avail of lines of credit from other banks in India if they are not in \na position to raise loans from abroad on their own or they do not have branches \nabroad \n354. The bank shall also use foreign currency funds borrowed in terms of Notification \nNo. FEMA.3(R)/2018-RB dated December 17, 2018 as also foreign currency funds \ngenerated through buy - sell swaps in the domestic forex market for granting facility"}
{"text": "of rediscounting of Export Bills Abroad (EBR) subject to adherence to Aggregate \nGap Limit (AGL) in terms of Master Direction - Risk Management and Inter-Bank \nDealings. \nG.4  \nFacility of Rediscounting 'with recourse' and 'without recourse' \n355. It is recognized that it will be difficult to get ‘without recourse’ facility from abroad \nunder BAF or any other facility. Therefore, the bills may be rediscounted ‘with \nrecourse’. However, if an AD is in a position to arrange ‘without recourse’ facility \non competitive terms, it shall avail itself of such a facility. \nG.5  \nAccounting aspects \n356. The rupee equivalent of the discounted value of the export bills shall be payable \nto the exporter and the same shall be utilised to liquidate the outstanding export \npacking credit. \n357. As the discounting of bills / extension of foreign exchange loans (DP bills) shall \nbe in actual foreign exchange, the bank shall apply appropriate spot rate for the \ntransactions. \n358. The rupee equivalents of discounted amounts / foreign exchange loan shall be \nheld in the bank’s books distinct from the existing post-shipment credit accounts. \n359. In case of overdue bills, the bank shall charge interest from the due date to the \ndate of crystallization as per the interest rate policy of the bank. \n360. In the event of export bill not being paid, the bank shall remit the amount \nequivalent to the value of the bill earlier discounted, to the overseas bank / agency \nwhich had discounted the bill, without the prior approval of the Reserve Bank. \nG.6  \nRestoration of limits and availability of export benefits such as EEFC \nAccount \n361. As stated in paragraph 355 of these Directions, ‘without recourse’ facility may \nnot generally be available. Thus, the restoration of exporter’s limits and the \navailability of export benefits, such as credit to EEFC accounts, in case of ‘with \nrecourse’ facility, shall be effected only on realisation of export proceeds and not \non the date of discounting / rediscounting of the bills, However, if the bills are \nrediscounted ‘without recourse’, the restoration of exporter’s limits and availability \nof export benefits shall be given effect immediately on rediscounting."}
{"text": "G.7  \nECGC cover \n362. In the case of export bills rediscounted ‘with recourse’, there shall not be any \nchange in the existing system of coverage provided by ECGC Ltd as the liability of \nthe exporter continues till the relative bill is retired / paid. In other cases, where the \nbills are rediscounted ‘without recourse’, the liability of ECGC ceases as soon as \nthe relative bills are rediscounted. \nG.8  \nExport credit performance \n363. Only the bills rediscounted abroad ‘with recourse’ basis and outstanding shall \nbe taken into account for the purpose of export credit performance. The bills \nrediscounted abroad ‘without recourse’ shall not count for the export credit \nperformance. \n364. Bills rediscounted ‘with recourse’ in the domestic market could get reflected \nonly in the case of the first bank discounting the bills as that bank alone will have \nrecourse to the exporter and the bank rediscounting shall not reckon the amount \nas export credit. \nH. Gold Card Scheme for exporters \n365. The bank shall lay down the criteria for issuing Gold Cards under the scheme \nto creditworthy exporters having good track record, including those in MSME \nsector. The bank shall clearly specify the benefits it shall be offering to Gold Card \nholders, based on the following salient features of the scheme. \n366. All creditworthy exporters, including those in small and medium sectors, with \ngood track record shall be eligible for issue of Gold Card by the bank as per the \ncriteria laid down by it. \n367. The scheme shall not be applicable for exporters placed in Specific Approval \nList (SAL) by ECGC or having overdue bills in excess of 10 per cent of the previous \nyear’s turnover. \n368. Gold Card holder exporters, depending on their track record and credit \nworthiness, shall be granted better terms of credit including rates of interest than \nthose extended to other exporters by the bank. \n369. Applications for credit shall be processed at norms simpler and under a process \nfaster than for other exporters."}
{"text": "370. The bank shall clearly specify the benefits it shall be offering to Gold Card \nholders. \n371. The charges schedule and fee-structure in respect of services provided by the \nbank to exporters under the Scheme shall be relatively lower than those provided \nto other exporters. \n372. The sanction and renewal of the limits under the Scheme shall be based on a \nsimplified procedure to be decided by the bank. Taking into account the anticipated \nexport turnover and track record of the exporter the bank shall determine need-\nbased finance with a liberal approach. \n373. 'In-principle' limits shall be sanctioned for a period of three years with a \nprovision for automatic renewal subject to fulfilment of the terms and conditions of \nsanction. \n374. A stand-by limit of not less than 20 per cent of the assessed limit shall be \nadditionally made available to facilitate urgent credit needs for executing sudden \norders. In the case of exporters of seasonal commodities, the peak and off-peak \nlevels shall be appropriately specified. \n375. In case of unanticipated export orders, norms for inventory shall be relaxed, \ntaking into account the size and nature of the export order. \n376. Requests from card holders shall be processed quickly by the bank within 25 \ndays / 15 days and seven days for fresh applications / renewal of limits and ad hoc \nlimits, respectively. \n377. Gold Card holders shall be given preference in the matter of granting of packing \ncredit in foreign currency. \n378. The bank may consider waiver of collaterals and exemption from the ECGC’s \nECIB schemes on the basis of card holder's creditworthiness and track record. \n379. The facility of further value addition to their cards through supplementary \nservices like ATM, Internet banking, international debit / credit cards may be \ndecided by the issuing bank. \n380. The applicable rate of interest to be charged under the Gold Card Scheme shall \nnot be more than the general rate for export credit in the respective bank. In \nkeeping with the spirit of the Scheme, the bank shall endeavour to provide the best"}
{"text": "rates possible to Gold Card holders on the basis of their rating and past \nperformance. \n381. Gold Card holders, on the basis of their track record of timely realization of \nexport bills, shall be considered for issuance of foreign currency credit cards for \nmeeting urgent payment obligations, etc. \n382. The bank shall ensure that the PCFC requirements of the Gold Card holders \nare met by giving them priority over non-export borrowers with regard to granting \nloans out of their FCNR(B) funds, etc. \n383. The bank shall consider granting term loans in foreign currency in deserving \ncases out of their FCNR(B), RFC, etc. funds (other than from their overseas \nborrowing limits prescribed by FED, RBI).  \n384.  The instructions relating to the Gold Card Scheme for Exporters shall be strictly \nimplemented and the branch level functionaries suitably sensitised in this regard. \nFurther, the bank shall also provide adequate publicity to the Scheme for the \nbenefit of exporters. \nI. \n'On line' credit to exporters \n385. Banks provide 'Line of Credit' normally for one year which is reviewed annually. \nIn case of delay in renewal, the sanctioned limits shall be allowed to continue \nuninterrupted and urgent requirements of exporters shall be met on ad hoc basis. \n386. In case of established exporters having satisfactory track record, the bank shall \nconsider sanctioning a 'Line of Credit' for a longer period, say, three years, with in-\nbuilt flexibility to step-up / step-down the quantum of limits within the overall \nassessed outer limits. The step-up limits will become operative on attainment of \npre-determined performance parameters by the exporters. The bank shall obtain \nsecurity documents covering the outer limit sanctioned to the exporters for such \nlonger period. \n387. In case of export of seasonal commodities, agro-based products, etc., the bank \nshall sanction Peak / Non-peak credit facilities to exporters. \n388. The bank shall permit interchangeability of pre-shipment and post- shipment \ncredit limits."}
{"text": "389. Assessment of export credit limits shall be 'need based' and not directly linked \nto the availability of collateral security. As long as the requirement of credit limit is \njustified on the basis of the exporter's performance and track record, the credit \nshall not be denied merely on the grounds of non-availability of collateral security. \nJ. Other Provisions \n390. Waiver of submission of orders or LCs for availing pre-shipment credit \nThe bank shall waive, ab initio, submission of order / LC in respect of exporters \nwith good track record and put in place the system of obtaining periodical \nstatement of outstanding orders / LCs on hand. The same shall be incorporated in \nthe sanction proposals as well as in the sanction letters issued to exporters and \nappropriately brought to the notice of ECGC. Further, if such waivers are permitted \nat a time subsequent to sanction of export credit limits with the approval of the \nappropriate authority, the same shall be incorporated in the terms of sanction by \nway of amendments and communicated to ECGC. \n391. Fast track clearance of export credit \nWhere feasible, the bank shall set up a 'Credit Committee' at specialized branches \nand at administrative offices, for sanctioning working capital facilities to exporters. \nThe 'Credit Committee' shall have sufficiently higher sanctioning powers. \n392. Pre-shipment \ncredit \nto \nDiamond \nExporters \n- \nConflict \nDiamonds - \nImplementation of Kimberley Process Certification Scheme (KPCS) \nIndia, among other countries, has adopted a UN mandated new Kimberley \nProcess Certification Scheme to ensure that no rough diamonds mined and \nillegally traded enter the country. Therefore, import of diamonds into India shall be \naccompanied by Kimberley Process Certificate (KPC). Similarly, exports from India \nshall also be accompanied by the KPC to the effect that no conflict / rough \ndiamonds have been used in the process. The KPCs shall be verified / validated \nin the case of imports / exports by the Gem and Jewellery Export Promotion \nCouncil. In order to ensure the implementation of Kimberley Process Certification \nScheme, the bank shall obtain an undertaking in the format given in Annex - III \nfrom such of the clients who have been extended credit for doing any business \nrelating to diamonds."}
{"text": "393. Consortium Finance – Sanction of Credit  \nIn the case of consortium finance, once the consortium has approved the \nassessment, member banks shall simultaneously initiate their respective sanction \nprocesses.  \n394. Credit Monitoring Arrangement - Export Credit \n(1) The bank shall ensure that the credit requirements of the export sector are \npromptly met and, additional credit needs of exporters for implementing export \norders, shall be met in full even if sanction of such additional credit exceeds \nMPBF. \n(2)  The bank shall take certain steps to ensure timely flow of need-based credit to \ntheir exporter-clients as also to inform us the action taken in this regard besides \nmonitoring the flow of credit to the export sector as also performance of such \nexporter-clients. \n(3) The bank shall reach a certain minimum level of export credit, viz., equivalent \nto ten per cent of each bank's net credit. Strict enforcement of this may please \nbe ensured. \n(4)  The bank shall ensure that there is a system of monitoring the flow of export \ncredit as also whether the export credit disbursement is in tune with the export \nperformance of your exporter-borrowers.  \n395. Compliance of Foreign Exchange Management Act, 1999 \nThe bank shall adhere to the directions issued under Foreign Exchange \nManagement Act, 1999 as amended from time to time. \nK. Special Measures \n396. Trade Relief Measures \nTo mitigate the burden of debt servicing brought about by trade disruptions caused \nby global headwinds and to ensure the continuity of viable businesses, banks \nextending export credit finance may provide relief measures to eligible borrowers, \nas specified under Reserve Bank of India (Trade Relief Measures) Directions, \n2025 dated November 14, 2025. The Directions inter alia include a defined sunset \nclause for the measures."}
{"text": "Chapter XVI - Non-Fund Based (NFB) Credit Facilities  \nBackground: Non-fund based (NFB) facilities like guarantees, letters of credit, co-\nacceptances etc. facilitate effective credit intermediation and smooth business \ntransactions. In order to harmonize and consolidate guidelines covering these \nfacilities and to broaden the funding sources for infrastructure financing, the Reserve \nBank had issued the following guidelines on NFB facilities. \n397. Within this Chapter, the term Regulated Entity (RE) or Regulated Entities (REs) \nshall refer to: \n(1) Commercial Banks (including Regional Rural Banks and Local Area Banks). \n(2) Primary (Urban) Co-operative Banks (UCBs) / State Co-operative Banks \n(StCBs) / Central Co-operative Banks (CCBs). \n(3) All India Financial Institutions (AIFIs). \n398. The Directions in this Chapter shall not apply to the derivative exposures of the \nbank, other than the general conditions as laid down in this Chapter. \n399. \n29[*****] \nA. General Conditions \n400. The credit policy of the bank shall incorporate suitable provisions for issue of \nNFB facilities, inter alia, covering aspects relating to type of NFB facilities, limits \ngranted, credit appraisal, security requirement, fraud prevention, overall \nmonitoring mechanism including post-sanction monitoring, delegation matrix, audit \nand internal controls, compliance to uniform standards issued by standard setting \nbodies and other safeguards. \n401. The bank shall issue a NFB facility only on behalf of a customer having funded \ncredit facility from the bank. \nProvided that this clause shall not be applicable in respect of: \n(1) Derivative contracts entered into by the bank with counterparty. \n(2) Partial Credit enhancement facility, as permitted under this Chapter. \n \n29 Deleted with effect from April 1, 2026"}
{"text": "(3) NFB facilities issued based on the counter guarantee of another RE, as \npermitted under this Chapter. \n(4) NFB facilities on behalf of an obligor who has not availed any fund based \nfacility from any RE in India. \n(5) NFB facilities extended by the bank against No Objection Certificate issued by \nthe RE / REs which has / have provided fund based facility to the obligor. \n(6) NFB facilities which are fully secured by eligible financial collateral. \nExplanation: The eligible financial collateral specified herein shall be as defined \nunder Reserve Bank of India (Commercial Banks – Prudential Norms on \nCapital Adequacy) Directions, 2025. \n402. The bank shall not issue a NFB facility to any entity assuring redemption / \nrepayment of funds raised by any entity via deposits, issuance of bonds, or in any \nother form, unless specifically permitted under any regulatory guidelines / \ndirections issued by the Reserve Bank. \n403. Once a NFB facility devolves and is converted into a fund based facility, then the \nprudential norms shall be as applicable to fund based facilities. \nB. Guarantees  \n404. In general, a guarantee (or a counter-guarantee) issued by the bank (guarantor) \nshall be irrevocable (i.e., there shall be no clause in the contract that would allow \nthe guarantor to unilaterally cancel the same), unconditional (i.e. there shall be no \nclause in the contract that could prevent the bank from being obliged to pay out in a \ntimely manner in the event that the original counterparty fails to meet its obligation), \nincontrovertible and shall contain a clear mechanism for honouring the same \nwithout demur as and when invoked. \n405. The bank shall put in place suitable internal aggregate / individual ceilings for \nissuance of guarantees in general and unsecured guarantees in particular. \n406. The provisions of the internal policy relating to guarantees shall, inter alia, \naddress aspects related to invocation and settlement mechanism, claim period, \ntenor, fee / commission / applicable charges, timelines for release of security, \nrenewal, fraud prevention measures etc."}
{"text": "407. A bank shall honour the guarantee issued by it as and when invoked in \naccordance with the terms and conditions of the guarantee deed unless there is a \ncourt order restraining the same. \nC. Usage of electronic-Guarantee \n408. Wherever a bank issues an electronic Guarantee, it shall frame a standard \noperating procedure (SOP) aimed at minimization of manual intervention; meeting \nsystem integration requirements; ensuring technological compatibility between the \nbank’s interface and the electronic Guarantee platforms, audit and internal controls \netc. The SOP shall, inter alia, consider the aspects mentioned at paragraphs 409 \nto 413 of these Directions. \n409. Policy and SOP for issuance of electronic Guarantees \n(1) The bank shall have suitable enabling provisions in its credit policy which shall, \ninter alia, envisage the adoption of electronic Guarantees, the risk controls to \nbe put in place, delegation of authority, the monitoring process, etc. \n(2) The bank shall put in place appropriate SOPs for user reference, detailing all \nthe steps to be followed during the entire electronic Guarantee lifecycle. \nElectronic Guarantees shall not be issued without ensuring that the underlying \ntransaction has been duly reflected in the Core Banking System (CBS)/ Trade \nFinance System (TFS). \n410. Integration of the systems with regard to issuance of electronic Guarantees \n(1) The bank shall have a strong control environment covering the policies, \nprocesses and systems; sound internal controls; and appropriate risk \nmitigation strategies for all operations pertaining to electronic Guarantees. \n(2) The bank shall ensure that all features relating to the entire lifecycle events of \nelectronic Guarantees such as issuance, amendment, invocation, cancellation \netc. shall be available on its platform through suitable integration with the \nelectronic Guarantee service provider. \n(3) The CBS / TFS shall be integrated with the APIs and other related messaging \nplatforms offered by the electronic Guarantee service provider, in Straight \nThrough Processing (STP) mode, without any manual intervention. \n411. User Roles for issuance of electronic Guarantees"}
{"text": "(1) The bank shall have an efficient system of ‘Maker, Checker and Authorizer’ for \nissuance and monitoring of electronic Guarantees, while ensuring strict access \ncontrol and an effective segregation of the role and accountability. \n(2) No role involved in electronic Guarantee issuance lifecycle shall violate \nprinciple of segregation of duties, four / six eye principle and no employee shall \nbe allocated roles / privileges across systems, applications that are conflicting \nin nature or in violation of four/ six eye principle. \n(3) The system access shall be provided only to specified users, and access \nthrough generic user IDs shall not be permitted. User review shall be \ncontinuous, at defined periodicity and identifiable at any point of time with \nrespective rights and privileges. The user privileges shall be decided on \"need \nto know/ need to do\" basis. \n412. Control Measures for issuance of electronic Guarantees \n(1) The bank shall have in place a system of periodical review and reconciliation \nof all the electronic Guarantees issued / modified / cancelled, during the \nspecified period. \n(2) The issuance of electronic Guarantees shall be mandatorily covered within the \nscope of concurrent audit and RBIA of the bank. \n413. Other aspects pertaining to issuance of electronic Guarantees \n(1) The robustness of the electronic Guarantee systems shall be part of the \nVulnerability Assessment / Penetration Testing (VA / PT), Information Systems \nAudit. \n(2) Dependence on the vendors for day-to-day transactions shall be avoided. \nAccess to production systems shall be provided to vendors only in a controlled \nenvironment, and audit trail shall be maintained. \n(3)  Security Incident and Event Management (SIEM) tool shall be integrated with \nthe concerned servers and consoles / PCs connected to electronic Guarantee \nrelated critical systems directly in its VLAN to generate automatic alerts. \n(4)  The bank shall integrate electronic Guarantee systems with Privileged User \nManagement Systems / Identity and Access Management systems. The logs of \nthe same shall be monitored through Security Operation Centre (SOC) setup."}
{"text": "(5) Business Continuity Measures and contingency plans for system failures, shall \nbe put in place by the bank.  \nD. Guarantee favouring another RE  \n414. The bank shall not provide a guarantee favouring another RE to enable it to \nprovide any fund based credit facility to an obligor, unless specifically permitted by \nRBI. \nProvided that this clause shall not be applicable in case of credit facilities extended \nagainst guarantees pertaining to trade related transactions. \n415. However, the bank may provide a guarantee favouring another RE for a NFB \nfacility extended by the latter. Such guarantee issued by a RE shall be treated as \nan exposure on the obligor on whose behalf the guarantee has been issued by it, \nfor all purposes including for the calculation of capital adequacy. The exposure of \nthe RE extending credit facility against a guarantee shall be treated as a claim / \nexposure on the RE which is providing the counter guarantee. \nE. Co-acceptances \n416. Only genuine trade bills shall be co-accepted, and it shall be ensured that the \ngoods covered by bills co-accepted are actually received in the stock accounts of \nthe borrowers. \n417. Proper records of the bills co-accepted for each customer shall be maintained, \nso that the commitments for each customer and the total commitments at a branch \ncan be readily ascertained, and these shall be part of internal audit. \n418. The bank shall not co-accept bills drawn by another lender or where the buyer \n/ seller has received funding for the underlying trade transaction from any lender. \nF. Guarantee and related business involving overseas current or capital \naccount transaction \n419. Banks permitted as Authorized Dealer (AD) may extend NFB facilities as \npermitted under the extant regulations / Directions issued under Foreign Exchange \nManagement Act, 1999, for bonafide current or capital account transaction, \nincluding guarantees in respect of debt or other liability incurred by an exporter on \naccount of exports from India."}
{"text": "420. AD banks are also permitted to issue guarantee to or on behalf of a foreign \nentity, or any of its step-down subsidiary in which an Indian entity has acquired \ncontrol through the foreign entity, which is backed by a counter-guarantee or \ncollateral by the Indian entity or its group company. \nProvided that such guarantees shall not be issued by banks, including overseas \nbranches/ subsidiaries of Indian banks, for the purpose of raising loans/ advances \nof any kind by the foreign entity except in connection with the ordinary course of \nbusiness overseas. Further while extending such guarantees, banks shall ensure \neffective monitoring of the end use of such facilities and its conformity with the \nbusiness needs of such entities. \nG. Guarantees on behalf of Stock / Commodity Brokers \n421. Only Scheduled Commercial Banks (SCBs) may issue guarantees on behalf of \nstock/ commodity brokers in favour of stock/ commodity exchanges in lieu of \nsecurity deposit to the extent it is acceptable in the form of bank guarantee as laid \ndown by exchanges. SCBs may also issue guarantees in lieu of margin \nrequirements as per exchange regulations read along with other instructions \nissued by Reserve Bank in this regard from time to time. \nH. Partial Credit Enhancement – Salient Features \n422. The bank may provide Partial Credit Enhancement (PCE) to bonds issued by \ncorporates / special purpose vehicles (SPVs) for funding all types of projects and \nto bonds issued by Non-deposit taking NBFCs with asset size of ₹1,000 crore and \nabove registered with RBI (including HFCs). PCE may also be provided to bonds \nissued by Municipal Corporations subject to adherence to, inter alia, paragraph 134 \nof these Directions. The objective behind allowing banks to extend PCE is to enhance \nthe credit rating of the bonds issued so as to enable corporates to access the funds \nfrom the bond market on better terms.  \n423. The credit policy of the bank shall incorporate suitable provisions for issue of \nPCE, covering issues such as quantum of PCE, underwriting standards, \nassessment of risk, pricing, setting limits, etc. \n424. PCE shall be a subordinated facility provided in the form of an irrevocable \ncontingent line of credit which will be drawn in case of shortfall in cash flows for \nservicing the bonds and thereby may improve the credit rating of the bond issue."}
{"text": "The contingent facility may, at the discretion of the PCE providing bank, be made \navailable as a revolving facility. \n425. A clear agreement documenting all aspects of this arrangement shall be signed \nbetween the promoter (bond issuer), the PCE providing bank, the bondholders \n(through the Trustee) and all other lenders to the project. The agreement to this \neffect shall be in the nature of a legally binding contract. The documentation for the \nfacility shall clearly define the circumstances under which the facility would be \ndrawn upon. \n426. The PCE exposure limit by a single bank shall be 50 per cent of the bond issue \nsize. The aggregate exposure limit of all PCE providers towards the PCE for a given \nbond issue has also been capped at 50 per cent of the bond issue size. \n427. The PCE facility shall be provided at the time of the bond issue and shall be \nirrevocable. PCE cannot be provided by way of guarantee. \n428. As the purpose of PCE by bank is to enable wide investor participation in the \ncorporate bond market, bank shall not invest in corporate bonds which are credit \nenhanced by any RE of the Reserve Bank. They may, however, provide other need \nbased credit facilities (funded and / or non-funded) to the corporate / SPV. \n429. Bank may offer PCE only in respect of bonds whose pre-enhanced rating are \nnot lower than “BBB” minus as issued by accredited External Credit Assessment \nInstitutions (ECAI). \n430. To be eligible for PCE, corporate bonds shall be rated by a minimum of two ECAI \nat all times. \n431. The rating reports, both initial and subsequent, shall disclose both standalone \ncredit rating (i.e., rating without taking into account the effect of PCE) as well as the \nenhanced credit rating (taking into account the effect of PCE). \n432. So long as the exposure of the bank to a project loan is classified as standard \nand the borrower is not in any financial distress (Refer to Reserve Bank of India \n(Commercial Banks – Resolution of Stressed Assets) Directions, 2025 for \nindicative list of signs of financial difficulty), providing a commercially priced PCE \nto enhance the rating of a bond issue, whose proceeds replace, in whole or in part, \nthe bank’s project loan, would not amount to restructuring."}
{"text": "433. The PCE shall be available only for servicing the bond and not for any other \npurpose (such as funding acquisition of additional assets by the corporate, meeting \npart of the project cost or meeting recurring expenses of the corporate or servicing \nother lenders / creditors to the project etc.), irrespective of the seniority of claims \nof other creditors in relation to the bond holders. \n434. In case the PCE facility is partly drawn and interest accrues on the same, the \nunpaid accrued interest shall be excluded from the calculation of the remaining \namount available for drawing. \n435. In a waterfall mechanism, Credit Enhancement (CE) gets drawn only in a \ncontingent situation of cash flow shortfall for servicing a debt / bond etc., and not in \nthe normal course of business. Hence, such an event is indicative of financial \ndistress of the project. Keeping this aspect in view, a drawn tranche of the \ncontingent PCE facility shall be required to be repaid within 30 days from the date \nof its drawal (due date). The facility shall be treated as NPA if it remains \noutstanding for 90 days or more from the due date and provided for as per the \nusual asset classification and provisioning norms. In that event, the bank’s other \nfacilities to the borrower shall also be classified as NPA as per extant guidelines. \n436. The PCE providing bank shall observe the following exposure limits: \n(1) PCE exposure by the bank to a single counterparty or group of counterparties \nshall be within the overall regulatory exposure limits applicable to the bank. \n(2) The aggregate PCE exposure of the bank shall not exceed 20 per cent of its Tier \n1 capital. \nI. \nAdditional conditions for providing PCE to bonds of NBFCs and HFCs \n437. The tenor of the bond issued by NBFCs / HFCs for which PCE is provided shall \nnot be less than three years. \n438. The proceeds from the bonds backed by PCE from banks shall only be utilized \nfor refinancing the existing debt of the NBFCs / HFCs. The bank shall introduce \nappropriate mechanisms to monitor and ensure that the end-use condition is met. \n439. The exposure of a bank by way of PCEs to bonds issued by each such NBFC \n/ HFC shall be restricted to one per cent of capital funds of the RE within the extant \nsingle / group borrower exposure limits."}
{"text": "J. Other Aspects of PCE \n440. The effect of the PCE on the bond rating shall be disclosed in the bond offer \ndocument i.e., the rating of the bond without and with the PCE shall be disclosed. \n441. The bank shall ensure that the project assets, created out of the bond issue for \nwhich PCE has been provided by them, and the cash flows from the project are \nring fenced through an escrow account mechanism administered under a bond \ntrustee arrangement. The manner in which security interest in the project assets \nwould be shared by the lenders to the project, bond holders and banks providing \nthe PCE and the manner in which the project cash flows would be shared for \nservicing loans, if any, and the bonds and PCE, shall be decided and agreed upon \nbefore the issue of bonds and shall be properly documented. \n442. The project shall have a robust and viable financial structure even before the \ncredit enhancement is taken into account. Nevertheless, while providing PCE, the \nbank shall exercise necessary due diligence and credit appraisal, including making \ntheir own internal credit analysis/ rating. \n443. The bank shall honour the full PCE commitment irrespective of the asset \nclassification of the concerned borrower’s credit facilities. \n444. All extant regulatory prescriptions for credit and investment exposures by the \nbanks, unless specified otherwise in this Chapter, shall continue to apply. \n445. For disclosure of the details of NFB credit facilities, the bank shall be guided \nby Reserve Bank of India (Commercial Banks – Financial Statements: \nPresentation and Disclosures) Directions, 2025. \n446. The Directions in this Chapter have been issued without prejudice to Directions \nunder Foreign Exchange Management Act (FEMA), 1999; Foreign Exchange \nManagement (Guarantees) Regulations, 2000, notified vide Notification No. FEMA \n8/2000-RB dated May 03, 2000; as amended from time to time. \n447. Notwithstanding paragraph 446 above, bank shall comply with all the related \nregulatory norms including Reserve Bank of India (Commercial Banks – \nConcentration Risk Management) Directions, 2025."}
{"text": "Chapter XVII - Miscellaneous Provisions \nA. Bank finance to Government owned entities \n448. While extending finance to Government owned entities, banks shall specifically \nensure adherence with paragraphs 96, 134, 138 and 450 of these Directions, and \nensure that bank finance is not in lieu of or a substitute for budgetary resources \nenvisaged for a project, and that finance is not extended against receivables from \nGovernments. \nB. Loans and advances to Micro, Small & Medium Enterprises (MSMEs) \n449. Lending to MSMEs by the bank shall be guided by Master Direction - Lending \nto Micro, Small & Medium Enterprises (MSME) Sector. \nC. Bridge Loans against Receivable from Government  \n450. The bank shall not extend bridge loans against amounts receivable from \nCentral / State Governments by way of subsidies, refunds, reimbursements, \ncapital contributions, etc. The following exemptions are, however, made: \n(1) The bank is permitted to finance subsidy receivable under current fertilizer \nsubsidy schemes of the Government of India that are akin to the erstwhile \nRetention Price Scheme (RPS) for periods up to 60 days in case of fertilizer \nindustry. It is clarified that the facility is being allowed as a purely temporary \nmeasure and the fertilizer companies should strengthen their financial position \ngradually so that they do not depend on the banks for finance against subsidy. \nNo other subsidy receivables such as, those in respect of claims raised by units \non the basis of expected revision in retention price because of escalation in \ncosts of inputs and in respect of freight, etc., shall be financed by the bank. \n(2) The bank may continue to grant finance against receivables from Government \nby exporters (viz. Duty Draw Back and IPRS) to the extent covered by the \nexisting instructions."}
{"text": "Chapter XVIII - Repeal and other provisions \nA. Repeal and saving \n451. With the issue of these Directions, the existing Directions, instructions, and \nguidelines relating to Credit Facilities as applicable to commercial banks stand \nrepealed, as communicated vide circular DOR.RRC.REC.302/33-01-010/2025-26 \ndated November 28, 2025. The Directions, instructions and guidelines already \nrepealed shall continue to remain repealed. \n452. Notwithstanding such repeal, any action taken or purported to have been taken, \nor initiated under the repealed Directions, instructions, or guidelines shall continue \nto be governed by the provisions thereof. All approvals or acknowledgments \ngranted under these repealed lists shall be deemed as governed by these \nDirections. Further, the repeal of these Directions, instructions, or guidelines shall \nnot in any way prejudicially affect: \n(1) any right, obligation or liability acquired, accrued, or incurred thereunder;  \n(2) any, penalty, forfeiture, or punishment incurred in respect of any contravention \ncommitted thereunder;  \n(3) any investigation, legal proceeding, or remedy in respect of any such right, \nprivilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid; \nand any such investigation, legal proceedings or remedy may be instituted, \ncontinued, or enforced and any such penalty, forfeiture or punishment may be \nimposed as if those directions, instructions, or guidelines had not been \nrepealed.  \nB. Application of other laws not barred \n453. The provisions of these Directions shall be in addition to, and not in derogation \nof the provisions of any other laws, rules, regulations, or directions, for the time \nbeing in force. \nC. Interpretations \n454. For the purpose of giving effect to the provisions of these Directions or in order \nto remove any difficulties in the application or interpretation of the provisions of \nthese Directions, the RBI may, if it considers necessary, issue necessary"}