Introduction
Reserve Bank of India (Reserve Bank) is statutorily mandated to operate the credit
system of the country to its advantage. In pursuit of this mandate, the Reserve Bank
encourages innovation in the financial systems, credit products and delivery
mechanisms while ensuring orderly growth, financial stability and the protection of
depositors’ and borrowers’ interest. With the progressive deregulation of bank credit,
prudential norms primarily serve as regulatory safeguards. These norms, issued from
time to time, provide guidance to regulated entities (REs) on the design and delivery
of credit-related products and services. These Directions consolidate the instructions
issued to commercial banks on credit facilities.
Accordingly, in exercise of powers conferred by Sections 21, and 35A of the Banking
Regulation Act, 1949, the Reserve Bank being satisfied that it is necessary and
expedient in the public interest so to do, hereby issues these Directions hereinafter
specified.
Chapter I -  Preliminary
A. Short Title and Commencement
1. These Directions shall be called the Reserve Bank of India (Commercial Banks –
Credit Facilities) Directions, 2025.
2. These Directions shall come into effect immediately upon its issuance, unless
indicated otherwise.
B. Applicability
3. These Directions shall be applicable to Commercial Banks (hereinafter collectively
referred to as 'banks' and individually as a 'bank').
For the purpose of these Directions, ‘Commercial Banks’ means banking
companies (other than Small Finance Banks, Payment Banks, and Local Area
Banks), corresponding new banks, and the State Bank of India, as defined
respectively under clauses (c), (da), and (nc) of Section 5 of the Banking
Regulation Act, 1949.


C. Definitions
4.
(1) For the purpose of these Directions, following definitions shall apply:
1[(ia) ‘Acquisition Finance’ shall mean a financial facility or assistance provided
to an eligible borrower entity for the purpose of acquiring control in a target
company (including through a scheme of amalgamation or merger). Such
funding may also involve refinancing of existing debt of the target company
if the refinancing is integral to the acquisition finance.]
2[(ib)] ‘Actual Date of Commencement of Commercial Operations (actual DCCO)’
means the date on which the project is put to commercial use and
completion certificate / provisional completion certificate / occupancy
certificate (in case of CRE and CRE-RH projects) or its equivalent is issued
to the concessionaire / project developer / promoter.
(ii) ‘Annual Percentage Rate’ (APR) means APR as defined under Reserve
Bank of India (Commercial Banks - Responsible Business Conduct)
Directions, 2025.
(iii) ‘Appointed Date’ means the date, as defined in the concession agreement
entered into between the concessionaire and the concession granting
authority, on which the concession agreement comes into force in
accordance with the terms outlined therein (applicable only in the case of
infrastructure projects under Public Private Partnership (PPP) model).
(iv) ‘Beneficiary’ means the party in whose favour the NFB facility is issued by
the bank.
3[(iva) ‘Bridge Finance’ shall mean financing a borrower for an interim period, not
exceeding one year, for a legitimate business purpose where the borrower
has a firm plan and capability to repay such loans by raising financial

1   Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026
2 Renumbered with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026
3 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026


resources either through issuance of equity, debt or hybrid instruments or
by divestiture/hive-off of a part of existing business/assets within the
interim period.]
(v) ‘Bullet Repayment Loans’ means loans where both principal and interest
are due for payment at the maturity of the loan.
4[(va) ‘Capital Market Intermediaries (CMIs)’ shall mean regulated entities
undertaking trade execution and market infrastructure services in capital
markets, including broking, clearing, custody, market making or other
incidental services.
Provided that CMIs shall not include Standalone Primary Dealers and
Qualified Central Counterparty (QCCPs).]
 (vb) ‘Cash and cash equivalents’ shall include cash, balances held in demand
and term deposits placed with the lending bank and investments in units of
overnight mutual funds (with a minimum haircut of 10 per cent).]
(vi) ‘Co-acceptance of bills’ means an undertaking to make payment to the
drawer of the bill (seller / exporter) on due date if the buyer / importer fails
to make the payment on that date.
(vii) 5[‘Collateral Security’ or ‘Collateral’ means an asset on which a security
charge is created in favour of the lender for securing a credit facility.]
(viii) ‘Consumption Loan’ means any permissible loan that does not fit the
definition of ‘income generating loan’ as defined subsequently.
6[(viiia) ‘Control’ shall have the same meaning as defined in Section 2(27) of the
Companies Act, 2013.]
(ix) ‘Credit Event’ in the context of project finance exposures, shall be deemed
to have been triggered on the occurrence of any of the following:
(a) Default with any lender.

4 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026
5 Substituted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026
6 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026


(b) Any lender(s) determines a need for extension of the original / extended
DCCO, as the case may be, of the project.
(c) Expiry of original / extended DCCO, as the case may be.
(d) Any lender(s) determines a need for infusion of additional debt.
(e) The project is faced with financial difficulty as determined under the
Reserve Bank of India (Commercial Banks – Resolution of Stressed
Assets) Directions, 2025.
(x) ‘Default Loss Guarantee (DLG)’ means a contractual arrangement, called
by whatever name, between the bank and another entity, under which the
latter guarantees to compensate the bank, for the loss due to default up to
a certain percentage of the loan portfolio of the bank, specified upfront. Any
other implicit guarantee of similar nature, linked to the performance of the
loan portfolio of the bank and specified upfront, shall also be covered under
the definition of DLG.
(xi) ‘Digital Lending’ means a remote and automated lending process, largely
by use of seamless digital technologies for customer acquisition, credit
assessment, loan approval, disbursement, recovery, and associated
customer service.
(xii) ‘Digital Lending Apps / Platforms’ (DLAs) means a mobile and / or web-
based applications, on a standalone basis or as a part of suite of functions
of an application with user interface that facilitate digital lending services.
DLAs shall include applications of the bank as well as those operated by
Lending Service Provider (LSP) engaged by bank for extending any credit
facilitation services in conformity with extant outsourcing guidelines issued
by the Reserve Bank.
(xiii) ‘Date of Financial Closure’ means the date on which the capital structure
of the project, including equity, debt, grant (only in the case of infrastructure
PPP projects) (if any), accounting for minimum 90 per cent of total project
cost, becomes legally binding on all stakeholders.
Explanation: In the case of CRE-RH projects, lenders may reckon
contingent sales receivables (if any) as part of promoters’ contribution to
the project.


(xiv) ‘Default’ means the non-payment of debt (as defined in Insolvency and
Bankruptcy Code (IBC), 2016) when whole or any part or instalment of the
debt has become due and payable and is not paid by the debtor.
7[(xiva) ‘Eligible Securities’ shall include the following securities:
(a) Listed Group-1 equity shares and preference shares;
Explanation: Group 1 securities as defined under instructions issued by
Securities and Exchange Board of India (SEBI)
(b) Government Securities, including Treasury Bills and Sovereign Gold
Bonds;
(c) Listed Debt Securities, including Convertible Debt Securities, rated
BBB or higher;
Explanation: Debt securities as defined under Section 2(1)(k) of the
SEBI (Issue and Listing of Non-Convertible Securities) Regulations,
2021 dated August 9, 2021, as updated from time to time.
(d) Units of Mutual Fund Schemes which are listed or where
repurchase/redemption facility is available for such units through the
Asset Management Company, with underlying investments in equity,
equity related instruments or debt instruments.
(e) Units of Exchange Traded Funds (excluding gold, silver and any other
commodity ETFs)
(f) Units of Real Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (InvITs).]
(xv) ‘Extended DCCO’: If the original DCCO is revised, then the revised DCCO
shall be termed as the Extended DCCO.
8[(xva) ’Gold Metal Loans’ (GML) mean loans extended by eligible banks to
specified borrowers in the form of gold metal.
(a) ’GMS-linked GML’ means GML extended by designated banks under the
Gold Monetization Scheme, 2015 (GMS), utilising – (i) the gold deposit

7 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026
8 Inserted with effect from April 01, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities)
Amendment Directions, 2025 dated December 4, 2025.


accepted by them as Short Term Bank Deposit under the GMS, or (ii) gold
borrowed from other designated banks under GMS, and where the
repayment can be either in gold or in cash or in a combination of both.
(b) ’Import-linked GML’ means GML extended by nominated banks
authorized to import gold, where the source of gold metal lent is gold
imported by them, and where repayment has to be necessarily in cash.]
(xvi) ‘Guarantee’ means a contract to perform the promise, or discharge the
liability, of a third person in the contingent case of his non-performance or
default, in terms of The Indian Contract Act, 1872.
(xvii) ‘Guarantor’ means the party which issues the guarantee.
(xviii) ‘Income Generating Loan’ means loans extended for the purpose of
productive economic activities, such as farm credit, loans for business or
commercial purposes, loans for creation or acquisition of productive assets
etc.
(xix) ‘Infrastructure Sector’ shall include the sub-sectors included in the
Harmonised Master List of Infrastructure sub-sectors issued by the
Department of Economic Affairs, Ministry of Finance, Government of India.
(xx) ‘Interest During Construction’ (IDC) means the interest accrued on debt
provided by a lender and capitalised during the construction phase of the
project.
(xxi) ‘Jewellery’ means items that are designed to be worn as personal
adornments.
(xxii) ‘Lending Service Provider’ (LSP) means an agent of the bank (including
another bank) who carries out one or more of bank’s digital lending
functions, or part thereof, in customer acquisition, services incidental to
underwriting and pricing, servicing, monitoring, recovery of specific loan or
loan portfolio on behalf of the bank in conformity with extant outsourcing
guidelines issued by the Reserve Bank.
Provided that, while entities offering only Payment Aggregator (PA)
services in terms of the extant instructions issued by the Reserve Bank
shall remain out of the ambit of these Directions, any PA also performing
the role of an LSP shall comply with Chapter III of these Directions.


9[(xxiia) ‘Loan to Value (LTV)’ shall mean the ratio of the outstanding loan amount
to the value of the securities as on any given day.
(xxiib) ‘Margin’ shall mean the contribution of the borrower, either in the form of
cash or other liquid assets, for the purpose of purchasing or borrowing a
security with bank finance or obtaining a non-fund-based facility from bank.
(xxiic) ‘Non-financial company’ shall mean an entity not primarily engaged in
undertaking financial activities, and in the context of domestic entities, shall
refer to a non-banking institution which is a company but not included in
the definition of a ‘financial institution’ or a ‘non-banking financial company’
as per the RBI Act, 1934.]
(xxiii) ‘Normal transit period’ means the average period normally involved from
the date of negotiation / purchase / discount till the receipt of bill proceeds
in the Nostro account of the bank concerned, as prescribed by FEDAI from
time to time.
Explanation: It is clarified that it is not the time taken for the arrival of goods
at overseas destination.
(xxiv) ‘Obligor’ in the context of Chapter XVI of these Directions means a party
against whose obligations, financial or otherwise, a NFB facility has been
issued. In the case of guarantees, the obligor may also be termed as
‘principal debtor’, as defined under the Indian Contract Act, 1872.
(xxv) ‘Original DCCO’ means the date, as envisaged at the time of financial
closure, by which the project is expected to be put to commercial use and
completion certificate / provisional completion certificate, or its equivalent,
is expected to be issued to the concessionaire / project developer /
promoter.
Provided that, in the case of CRE and CRE-RH projects, original DCCO
shall be the date on which Occupancy Certificate, or its equivalent, is
expected to be obtained from the competent authority.

9Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026


(xxvi) ‘Ornaments’ means items meant for use as adornment of any object,
decorative items, or utensils, excluding those items that fall under the
definition of jewellery as defined previously.
(xxvii) ‘Overdue bill’ in the case of a demand bill means a bill which is not paid
before the expiry of the normal transit period, plus grace period. In the case
of a usance bill, it refers to a bill which is not paid on the due date.
(xxviii) ‘Post-shipment Credit’ means any loan or advance granted or any other
credit provided by the bank to an exporter of goods / services from India
from the date of extending credit after shipment of goods / rendering of
services to the date of realisation of export proceeds, and includes any loan
or advance granted to an exporter, in consideration of, or on the security
of any duty drawback allowed by the Government from time to time.
(xxix) ‘Pre-shipment’ / ‘Packing Credit’ means any loan or advance granted or
any other credit provided by the bank to an exporter for financing the
purchase, processing, manufacturing or packing of goods prior to shipment
/ working capital expenses towards rendering of services on the basis of
letter of credit opened in his favour or in favour of some other person, by
an overseas buyer or a confirmed and irrevocable order for the export of
goods / services from India or any other evidence of an order for export
from India having been placed on the exporter or some other person,
unless lodgement of export orders or letter of credit with the bank has been
waived.
(xxx) ‘Primary Gold’ and ‘Primary Silver’ means gold and silver in any form
other than in the form of a jewellery, ornaments and coins.
10[(xxxa) ‘Primary Security’ shall mean security created on assets which have
been financed out of the credit facility extended to the borrower.]
(xxxi) ‘Project’ in the context of Chapter VII of these Directions means a
venture undertaken through capital expenditure (involving current and
future outlay of funds) for creation / expansion / upgradation of tangible
assets and / or facilities in the expectation of stream of cash flow benefits

10 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit
Facilities) Amendment Directions, 2026 (Revised) dated March 30, 2026


extending far into the future. Projects usually have the characteristics of a
long gestation period, irreversibility and substantial capital outlays.
(xxxii) ‘Project Finance’ in the context of Chapter VII of these Directions refers
to the method of funding a project in which the revenues to be generated
by the funded project serve as the primary security for the loan, and also
as a source of repayment. Project finance may take the form of financing
the construction of a new capital installation (greenfield), or financing an
improvement / enhancement in the existing installation (brownfield). For
the purpose of these Directions, an exposure shall qualify as a project
finance exposure only if the following conditions are satisfied:
(a) The pre-dominant source of repayment as envisaged at the time of
financial closure (i.e., at least 51 per cent) must be from cash flows
arising from the project which is being financed.
(b) All the lenders have a common agreement with the debtor.
Explanation: A common agreement may have different loan terms
(except original / extended / actual DCCO as specified in paragraph 76
of these Directions) for each of the lender provided the same has been
agreed upon by the debtor and all the lender(s) to the project.
(xxxiii) ‘Restructuring’ shall have the same meaning as specified under
Reserve Bank of India (Commercial Banks - Resolution of Stressed
Assets), Directions, 2025.
(xxxiv) ‘Resolution Plan’ (RP) shall have the same meaning as specified under
Reserve Bank of India (Commercial Banks – Resolution of Stressed
Assets) Directions, 2025
(xxxv) ‘Secured portion of an NFB facility’ means the portion of the facility
covered by realisable value of tangible security/ collateral estimated on a
realistic basis.
(xxxvi) ‘Top-up Loan’ in the context of Chapter IV of these Directions means
an additional loan sanctioned over and above an outstanding loan, during
the tenor of the original loan, based on the strength of the collateral already
pledged for the existing loan.
(2) All other expressions unless defined herein shall have the same meanings as
have been assigned to them under the Banking Regulation Act, 1949 or the


Reserve Bank of India Act, 1934, or any statutory modification or re-enactment
thereto or in other relevant directions issued by the Reserve Bank or as used
in commercial parlance, as the case may be.


Chapter II - Role of The Board
5. A bank shall put in place a Board-approved credit policy covering, inter alia, the
areas specified below, to the extent such activities are undertaken by it. The
specific aspects to be addressed in such a policy are detailed in the relevant
paragraphs of these Directions.
(1) Digital Lending including DLG
(2) Lending Against Gold and Silver Collateral
(3) Gold Metal Loans
(4) Microfinance Loans
(5) Project Finance
(6) 11[Credit Facilities to Real Estate Sector, including Housing Finance]
(7) Finance to NBFCs
(8) Issue of Non-Fund Based Credit Facilities like guarantee, letter of credit, co-
acceptance, partial credit enhancement.
(9) Discounting / Rediscounting of Bills
(10) Export Credit
(11) 12[Loan Against Financial Assets including eligible securities]
(12) Credit Facilities to Overseas Joint Ventures (JV)
(13) 13[Bridge Finance]
(14) Exposure to Infrastructure Investment Trusts (InvITs)
14[(15) Acquisition Finance, including financing extended by overseas branches of
Indian banks.
(16) Credit Facilities to Capital Market Intermediaries (CMIs)]

11 Modified with effect from July 01, 2026
12 Substituted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026
13 Substituted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026
14 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities)
Amendment Directions, 2026 (Revised) dated March 30, 2026


15[
Chapter IIA: Credit Facilities Linked to Specific Payment Instruments
5A. Notwithstanding the mode / channel of credit delivery or the type of payment
instrument and / or underlying technology used for its disbursement, the
prudential treatment of an underlying credit facility, including pre-sanctioned
credit lines meant for payment transactions through UPI, shall be solely
determined by the nature of the underlying credit facility, governed in terms of
the applicable prudential norms.
5B. Any credit facility which is designed to be linked to a specific payment mode, shall
have its terms and conditions included in the bank’s credit policy and shall
comply with all other applicable regulatory requirements.
Explanation – For avoidance of any doubt, it is clarified that only such credit
facilities as are otherwise permitted to be sanctioned by a bank under the extant
regulations, can be offered as part of any such arrangement.
5C. The above instructions shall be without derogation to the provisions of any other
law or regulation in relation to transactions effected through any payment
mechanism.]

15 Inserted with effect from June 23, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities) Fourth
Amendment Directions, 2026 dated June 23, 2026.


Chapter III - Digital Lending Guidelines
A. General Requirements for bank-LSP Arrangements
6. Due diligence requirements with respect to LSPs
(1) Digital lending by a bank involving a LSP, shall be carried out under a
contractual agreement between the bank and the LSP, which clearly defines
the respective roles, rights, and obligations of each party thereto.
(2) A bank shall conduct enhanced due diligence before they enter into an
agreement with a LSP for digital lending, taking into account LSP’s technical
capabilities, robustness of data privacy policies and storage systems, fairness
in conduct with borrowers, past records of conduct and ability to comply with
all applicable regulations and statutes.
(3) A bank shall carry out periodic review of the conduct of the LSP vis-à-vis the
terms of the contractual agreement and shall take appropriate action in the
event of any deviation therefrom.
(4) A bank shall lay down, as part of its policy, suitable monitoring mechanisms for
the loan portfolios originated with the support of LSPs.
(5) A bank shall impart necessary guidance to LSP acting as a recovery agent, to
discharge their duties responsibly and ensure that LSP complies with the
applicable instructions in Reserve Bank of India (Commercial Banks –
Responsible Business Conduct) Directions, 2025.
(6) A bank shall continue to conform to the extant guidelines on outsourcing as
detailed in Reserve Bank of India (Commercial Banks – Managing Risks in
Outsourcing) Directions, 2025 and shall ensure that the LSPs engaged by it
and the DLAs (either of the bank or of the LSPs engaged by the bank) comply
with these Directions.
(7) As an overarching principle, any outsourcing agreement entered into by a bank
with an LSP shall in no manner dilute or absolve the bank of its obligations
under any statutory or regulatory provision, and the bank shall remain fully
responsible and liable for all acts and omissions of the LSP.
7. Bank-LSP arrangements involving multiple lenders
In cases where an LSP has agreements with multiple lenders for digital lending,
each lender shall ensure the following:


(1) An LSP shall provide a digital view of all the loan offers matching the borrower’s
request on the DLA which meets the requirement of the borrower. The name
of the unmatched lenders shall also be disclosed in the digital view.
(2) While the LSP may adopt any mechanism to match the request of borrowers
with the lender(s) to offer a loan, it shall follow a consistent approach for
similarly placed borrowers and products. The mechanism adopted by the LSP
and any subsequent changes to this mechanism shall be properly
documented.
(3) The digital view of loan offers from matching lenders shall include the name(s)
of the lender(s) extending the loan offer, amount and tenor of loan, APR,
monthly repayment obligation and penal charges (if applicable), in a way which
enables the borrower to make a fair comparison between various offers. A link
to the KFS shall also be provided in respect of each of the lender.
(4) The content displayed by the LSP shall be unbiased, objective and shall not
directly / indirectly promote or push a product of a particular lender, including
the use of dark patterns / deceptive patterns designed to mislead borrowers
into choosing a particular loan offer. However, ranking of loan offers based on
a publicly pre-disclosed metric for such ranking shall not be construed as
promoting a particular product.
Explanation: Dark patterns shall have the same meaning as defined under
section 2(e) of the ‘Guidelines for Prevention and Regulation of Dark Patterns,
2023’ dated November 30, 2023, issued by Central Consumer Protection
Authority, and as amended from time to time.
B. Conduct and Customer Protection Requirements
8. Assessing the borrower’s creditworthiness
(1) A bank shall obtain the necessary information relating to economic profile of
the borrower with a view to assessing the borrower’s creditworthiness before
extending any loan, including, at a minimum, age, occupation and income
details. The same shall be kept on record for audit purposes.
(2) A bank shall ensure that there is no automatic increase in credit limit unless an
explicit request is received, evaluated and kept on record from the borrower
for such increase.


9. Disclosures to borrowers
(1) A bank shall provide a Key Fact Statement (KFS), as per instructions contained
in Reserve Bank of India (Commercial Banks - Responsible Business
Conduct), Directions, 2025.
(2) As regards penal charges, a bank shall be guided by Reserve Bank of India
(Commercial Banks - Responsible Business Conduct), Directions, 2025.
(3) A bank shall ensure that digitally signed documents (on the letter head of the
bank) viz., KFS, summary of loan product, sanction letter, terms and
conditions, account statements, privacy policies of the bank / LSP with respect
to storage and usage of borrowers’ data, etc. shall automatically flow to the
borrower on the registered and verified email / SMS upon execution of the loan
contract / transactions.
Explanation: Digitally signed documents shall be in compliance with the
provisions of the Information Technology Act, 2000, as amended from time to
time.
(4) The bank shall maintain a website of their own in public domain, which shall be
kept up to date, inter-alia, with the following details at a prominent single place
on the website for ease of accessibility:
(i) Details of all of its digital lending products and its DLAs.
(ii) Details of LSPs and the DLAs of the LSPs along with the details of the
activities for which they have been engaged for.
(iii) Particulars of bank’s customer care and internal grievance redressal
mechanism.
(iv) Link to the Reserve Bank’s Complaint Management System (CMS) and
Sachet Portal.
(v) Privacy policies and other details as required under extant guidelines of the
Reserve Bank.
(5) A bank shall ensure that DLAs / LSPs have links to the above website of the
bank.
(6) In case of a loan default, when a recovery agent is assigned for recovery or
there is a change in the recovery agent already assigned, the particulars of
such recovery agent authorised to approach the borrower for recovery shall be


communicated to the borrower through email / SMS before the recovery agent
contacts the borrower for recovery.
10.  Loan disbursal, servicing, and repayment
(1) Disbursement of loan by a bank shall always be made into the bank account of
the borrower except for disbursals covered exclusively under statutory or
regulatory mandate (of the Reserve Bank or of any other regulator), flow of
money between lenders for co-lending transactions and disbursals for specific
end use, provided the loan is disbursed directly into the bank account of the
end-beneficiary. The bank shall ensure that in no case, disbursal is made to a
third-party account, including the accounts of LSP, except as provided in this
Chapter.
Provided that, advances against salary, where the loan is disbursed directly to
the bank account of the borrower, but the repayment is from the corporate
employer, can be allowed subject to the condition that the loan is repaid by the
corporate employer by deducting the amount from the borrower’s salary.
However, it must be ensured that LSPs do not have any control over the flow
of funds directly or indirectly in such transactions and that repayment is directly
from the bank account of the employer to the bank.
Explanation: Co-lending arrangements shall be governed by the Reserve Bank
of India (Commercial Banks – Transfer and Distribution of Credit Risk)
Directions, 2025, subject to the condition that no third party other than the
lenders in a co-lending transaction shall have direct or indirect control over the
flow of funds at any point of time.
(2) A bank shall ensure that all loan servicing, repayment, etc. is executed by the
borrower directly in the bank’s account without any pass-through account / pool
account of any third party, including the accounts of LSP.
(3) The flow of funds between the bank accounts of the borrower and the bank
shall not be controlled either directly or indirectly by a third-party, including the
LSP.
(4) A bank shall ensure that any fees, charges, reimbursements, etc. payable to
LSP are paid directly by the bank and are not charged to or collected from the
borrowers separately by LSP.


(5) In case of delinquent loans, a bank may deploy physical interface to recover
loans in cash, wherever necessary. In order to afford operational flexibility to
the bank, such transactions are exempted from the requirement of direct
repayment of loan in the bank’s account. However, any recovery by cash shall
be duly reflected in full in the borrower’s account on the same day and the bank
shall ensure that any fees, charges, etc., payable to LSPs for such recovery
are paid directly by the bank and are not charged by LSP to the borrower either
directly or indirectly from the recovery proceeds.
11. Cooling-off period
(1) The borrower shall be given an explicit option to exit a digital loan by paying
the principal and the proportionate APR without any penalty during an initial
“cooling-off period”. The cooling off period shall be determined by the bank in
terms of its credit policy, subject to the period so determined not being less
than one day. For borrower continuing with the loan even after cooling-off
period, pre-payment shall continue to be allowed as per the Reserve Bank of
India (Commercial Banks - Responsible Business Conduct) Directions, 2025.
(2) The bank may retain a reasonable one-time processing fee, if the customer
exits the loan during the cooling-off period. This, if applicable, shall be
disclosed to the customer upfront in KFS.
12. Grievance redressal
(1) A bank, and its LSP which has an interface with the borrower, shall designate
nodal grievance redressal officers to deal with digital lending related
complaints / issues raised by the borrower.
(2) Contact details of the nodal grievance redressal officers shall be prominently
displayed on the websites of the bank, its LSP and on the DLA, as well as in
the KFS provided to the borrower.
(3) The facility of lodging complaint shall also be made available on the DLA and
on the website as stated above. It is reiterated that responsibility of grievance
redressal shall continue to remain with the bank.
(4) If any complaint lodged by the borrower against the bank or the LSP engaged
by the bank is rejected wholly or partly by the bank, or the borrower is not
satisfied with the reply; or the borrower has not received any reply within 30


days of receipt of complaint by the bank, the said borrower can lodge a
complaint
over
the
Complaint
Management
System
(CMS
-
https://cms.rbi.org.in/) portal under the Reserve Bank-Integrated Ombudsman
Scheme
(RB-IOS
-
Issued
vide
Notification
CEPD.
PRD.
No.S873/13.01.001/2021-22 dated November 12, 2021) or send a physical
complaint to “Centralised Receipt and Processing Centre, 4th Floor, Reserve
Bank of India, Sector -17, Central Vista, Chandigarh - 160017” as per the
grievance redressal mechanism prescribed by the Reserve Bank. This
information shall be suitably conveyed to the borrower.
C. Technology and Data Requirement
13. Collection, usage and sharing of data with third parties
(1) A bank shall ensure that any collection of data by its DLA and DLA of its LSP
is need-based and with prior and explicit consent of the borrower having audit
trail. In any case, the bank shall also ensure that DLA of the bank / LSP desist
from accessing mobile phone resources like file and media, contact list, call
logs, telephony functions, etc. A one-time access can be taken for camera,
microphone, location or any other facility necessary for the purpose of on-
boarding / KYC requirements only, with the explicit consent of the borrower.
(2) The borrower shall be provided with an option to give or deny consent for use
of specific data, restrict disclosure to third parties, data retention, revoke
consent already granted to collect personal data and if required, make the bank
/ LSP delete / forget the data.
(3) The purpose of obtaining borrowers’ consent needs to be disclosed at each
stage of interface with the borrowers.
(4) Explicit consent of the borrower shall be taken before sharing personal
information with any third party, except for cases where such sharing is
required as per statutory or regulatory requirement.
14. Storage of data
(1) A bank shall ensure that LSP engaged by them do not store personal
information of borrower except some basic minimal data (viz., name, address,
contact details of the customer, etc.) that may be required to carry out their
operations or service within the scope of the bank-LSP agreement.


Responsibility regarding data privacy and security of the customer’s personal
information on an ongoing basis shall be that of the bank.
(2) A bank shall ensure that clear policy guidelines regarding the storage of
customer data including the type of data that can be stored, the length of time
for which data can be stored, restrictions on the use of data, data destruction
protocol, standards for handling security breach, etc., are put in place and also
disclosed by the bank and the LSP engaged by the bank prominently on their
website and DLA at all times.
(3) A bank shall ensure that no biometric data is stored / collected by them and
LSP, unless allowed under extant statutory guidelines.
(4) A bank shall ensure that all data is stored only in servers located within India,
while ensuring compliance with statutory obligations / regulatory instructions.
Further, in case the data is processed outside India, the same shall be deleted
from servers outside India and brought back to India within 24 hours of
processing.
15. Comprehensive privacy policy
(1) A bank and LSPs engaged by the bank shall have a comprehensive privacy
policy compliant with applicable laws, associated regulations and the Reserve
Bank guidelines which shall be made available publicly on the website of the
bank and LSP, as the case may be.
(2) Details of third parties (where applicable) allowed to collect personal
information through the DLA shall also be disclosed in the privacy policy.
16. Technology standards
A bank shall ensure that they and the LSPs engaged by them comply with various
technology standards / requirements on cybersecurity stipulated by the Reserve
Bank and other relevant agencies, or as may be specified from time to time, for
undertaking digital lending.
D. Reporting of Credit Information and DLAs
17. Reporting to Credit Information Companies (CICs)
(1) As per the provisions of the Credit Information Companies (CIC) (Regulation)
Act, 2005; CIC Rules, 2006; CIC Regulations, 2006 and related guidelines
issued by the Reserve Bank from time to time, a bank shall ensure that any


lending done through their DLAs and / or DLAs of LSPs is reported by them to
CICs irrespective of its nature / tenor.
(2) Extension of structured digital lending products by a bank and / or LSPs
engaged by the bank over a merchant platform involving short term, unsecured
/ secured credits or deferred payments, need to be reported to CICs by the
bank. The bank shall ensure that LSPs, if any, associated with such deferred
payment credit products shall abide by the extant outsourcing guidelines
issued by the Reserve Bank and be guided by the instructions contained in this
Chapter.
18.  Reporting of DLAs to the Reserve Bank
(1) The bank shall report all DLAs deployed / joined by them, whether their own or
those of the LSPs, either exclusively or as a platform participant, on the
Centralised Information Management System (CIMS) portal of the Reserve
Bank in the requisite format as given in the Annex - I to these Directions.
(2) The bank shall update the aforesaid list as and when additional DLA(s) are
deployed or the engagement with the existing DLA(s) ceases to exist by filing
the updated data in the CIMS portal.
(3) The Chief Compliance Officer of the bank or any other official designated by
the Board of the bank for the purpose shall certify that the data on DLAs
submitted by them on the CIMS portal is correct and the DLAs are compliant
with all the extant regulatory instructions, including the provisions of this
Chapter.
(4) Without prejudice to the generality of the above, the Chief Compliance Officer
/ other official designated by the Board of the bank shall certify the following
aspects:
(i) DLAs have link to the bank’s website where further information about the
loan products, the lender, the LSP, particulars of customer care, link to
Sachet Portal, privacy policies, etc. can be accessed by the borrower.
(ii) DLAs (in case owned by LSP), have appointed a suitable nodal grievance
redressal officer to deal with digital lending related complaints / issues
raised by the borrower, details of which are prominently available on the
respective DLA.


(iii) Data collection and storage by DLAs is in compliance with paragraphs 13
and 14 of these Directions and other statutory and regulatory requirements,
as applicable from time to time.
(iv) The DLA’s particulars submitted by the bank are also suitably disclosed on
the bank’s website as required under paragraph 9(4) of these Directions.
(5) The bank shall ensure the correctness and timeliness of information regarding
DLAs, as the data, as submitted by the bank on CIMS, shall be published on
the website of the Reserve Bank in an automated manner and the Reserve
Bank shall not verify / validate the data submitted on CIMS. All issues and
grievances of customers concerning DLAs shall be addressed and dealt with
by the bank directly.
(6) The bank shall ensure that the inclusion of any third party DLAs deployed by
them as part of above reporting, shall not be construed by the DLAs or any
associated entity as conferring any form of registration, authorization, or
endorsement by the Reserve Bank. The bank shall also ensure that such
inclusion is not misrepresented in any marketing, promotional, or other
materials issued by or on behalf of the DLAs.
E. Loss sharing arrangement in case of default
19. Eligibility as Default Loss Guarantee (DLG) provider
A bank may enter into DLG arrangements only with a LSP / other lender engaged
as an LSP. Further, the LSP providing DLG shall be incorporated as a company
under the Companies Act, 2013.
20. Due diligence and other requirements with respect to DLG provider
(1) A bank, including a bank acting as DLG provider, shall lay down, as part of its
policy, the eligibility criteria for DLG provider, nature and extent of DLG cover,
process of monitoring and reviewing the DLG arrangement, and the details of
the fees, if any, payable to / received by the DLG provider, as the case may
be, before entering into any DLG arrangement.
(2) A bank shall ensure that any DLG arrangement does not act as a substitute for
credit appraisal requirements and robust credit underwriting standards need to
be put in place irrespective of the DLG cover.


(3) Every time a bank enters into or renews a DLG arrangement, it shall obtain
adequate information to satisfy itself that the entity extending DLG would be
able to honour it. Such information shall, at a minimum, include a declaration
from the DLG provider, certified by the statutory auditor of the DLG provider,
on the aggregate DLG amount outstanding, the number of lenders and the
respective number of portfolios against which DLG has been provided. The
declaration shall also contain past default rates on similar portfolios.
(4) It is clarified that the due-diligence requirements specified herein are in addition
to the general requirements applicable to bank-LSP arrangements as set out
in paragraph 6 of these Directions.
21. Restrictions on entering into DLG arrangements
(1) A bank shall not enter into DLG arrangements for revolving credit facilities
offered through digital lending channel and credit cards as defined under
Reserve Bank of India (Commercial Banks – Credit Cards and Debit Cards:
Issuance and Conduct) Directions, 2025.
(2) The bank shall not enter into DLG arrangements on the loans which are
covered by the credit guarantee schemes administered by trust funds as
specified under Reserve Bank of India (Commercial Banks – Prudential Norms
on Capital Adequacy) Directions, 2025.
22. Structure of DLG arrangements
DLG arrangements shall be backed by an explicit and legally enforceable contract
between the bank and the DLG provider. Such contract, among other things, shall
contain the following details:
(1) Extent of DLG cover.
(2) Form in which DLG cover is to be maintained with the bank.
(3) Timeline for DLG invocation.
(4) Disclosure requirements as under paragraph 28 of these Directions.
23. Forms of DLG
A bank shall accept DLG only in one or more of the following forms:
(1) Cash deposited with the bank.


(2) Fixed Deposit maintained with a Scheduled Commercial Bank with a lien
marked in favour of the bank.
(3) Bank Guarantee in favour of the bank.
24. Cap on DLG
(1) A bank shall ensure that the total amount of DLG cover on any outstanding
portfolio which is specified upfront shall not exceed five per cent of the total
amount disbursed out of that loan portfolio at any given time. In case of implicit
guarantee arrangements, the DLG Provider shall not bear performance risk of
more than the equivalent amount of five per cent of the underlying loan
portfolio.
(2) The portfolio over which DLG can be offered shall consist of identifiable and
measurable loan assets which have been sanctioned (the ‘DLG set’). This
portfolio shall remain fixed for the purpose of DLG cover and is not meant to
be dynamic.
(3) Illustrative examples on cap on DLG:
Illustration I
Assume that as on April 1, 2024 the bank earmarks a portfolio of ₹40 crore
(out of the total sanctioned loans) under a DLG arrangement (DLG set). This
portfolio shall remain "frozen" for the purpose of the specific DLG arrangement
- meaning that no loan assets can be added or removed from it, except through
loan repayment/ write-off. The bank can have such multiple DLG sets.
The ceiling for DLG cover on such portfolio shall be fixed at ₹2 crore (5 per
cent of ₹40 crore), which shall get activated proportionately as and when the
loans are disbursed.
Illustration II
Assume that out of the above DLG set, loans amounting to ₹10 crore are
disbursed immediately. Then as on April 1, 2024, the DLG cover available for
the portfolio shall be ₹0.5 crore (5 per cent of disbursed).
Subsequently, if loans of ₹10 crore are further disbursed on April 15, 2024, the
DLG cover shall proportionately increase to ₹1 crore effective April 15, 2024.
(Refer table below also for summary of each case)


Case 1: As on June 30, 2024, loans worth ₹5 crore mature without any default.
In this case, the outstanding portfolio in the books of the bank would be ₹15
crore and the DLG cover shall remain at ₹1 crore.
Case 2: Subsequently, there is a default of ₹2 crore during Q2-2024 and
consequently the bank invokes the entire DLG of ₹1 crore (assuming that till
date zero principal / interest have been received towards these loans). In this
case, as of Sept 30, 2024 the outstanding portfolio in the books of the bank
shall be ₹15 crore (₹20 crore original portfolio less ₹5 crore loans matured
without default) but no headroom for DLG will be available as the maximum
permissible DLG cover of ₹1 crore (5 per cent of disbursed) has been
exhausted.
Case 3: Going further, let’s assume that recovery worth ₹1 crore is made by
the bank during October 2024 on the defaulted loans of ₹2 crore. In such a
case, the amount of the outstanding portfolio in the books of the bank as on
October 31, 2024 shall come down to ₹14 crore (₹20 crore original portfolio
less ₹5 crore loans matured without any default less ₹1 crore loans which were
in default and recovered). However, the recovery amount of ₹1 crore cannot
be added to reinstate the DLG cover.
(figures in ₹ crore)
Period
Disbursed
Loan
maturing
without
default
Default
Amount
DLG
Invoked
Recovery/
Write-off
Outstanding
Portfolio
Available
DLG
Cover
Initial
Position
10
-
-
-
-
10
0.5
Further
disbursement
10
-
-
-
-
20
1
Case 1
20
5
-
-
-
15
1
Case 2
20
5
2
1
-
15
0
Case 3
20
5
2
1
1
14
0

25. Recognition of NPA
(1) Recognition of individual loan assets in the portfolio as Non-Performing Asset
(NPA) and consequent provisioning shall be the responsibility of the bank as
per the Reserve Bank of India (Commercial Banks – Income Recognition,
Asset Classification and Provisioning) Directions, 2025 irrespective of any DLG
cover available at the portfolio level.


(2) The amount of DLG invoked shall not be set off against the underlying
individual loans, i.e. the liability of the borrowers in respect of the underlying
loan shall remain unaffected.
(3) Recovery by a bank, if any, from the loans on which DLG has been invoked
and realised, can be shared with the DLG provider in terms of the contractual
arrangement.
(4) DLG amount once invoked by the bank shall not be reinstated, including
through loan recovery.
26. Treatment of DLG for regulatory capital
(1) Capital computation, i.e., computation of exposure and application of Credit
Risk Mitigation benefits on individual loan assets in the portfolio shall continue
to be governed by the Reserve Bank of India (Commercial Banks – Prudential
Norms on Capital Adequacy) Directions, 2025.
(2) In case, DLG provider is a bank, it shall deduct full amount of the DLG which is
outstanding from its capital.
27. Invocation and tenor of DLG
(1) A bank shall invoke DLG within a maximum overdue period of 120 days, unless
the loan dues are made good by the borrower before that.
(2) The period for which the DLG agreement remains in force shall not be less than
the longest tenor of the loan in the underlying loan portfolio.
28. Disclosure requirements
(1) The bank shall put in place a mechanism to ensure that LSPs with whom they
have a DLG arrangement shall publish on their website the total number of
portfolios and the respective amount of each portfolio on which DLG has been
offered. The name of the lender(s) may or may not be disclosed as part of
disclosure under this provision.
(2) Disclosure under paragraph (1) above shall be made on a monthly basis, with
the disclosure for any given month to be provided no later than seven working
days following the conclusion of that month.

29. Exceptions
Guarantees covered under the following schemes / entities shall not be covered
within the definition of DLG:
(1) Guarantee schemes of Credit Guarantee Fund Trust for Micro and Small
Enterprises (CGTMSE), Credit Risk Guarantee Fund Trust for Low Income
Housing (CRGFTLIH) and individual schemes under National Credit
Guarantee Trustee Company Ltd (NCGTC).
(2) Credit guarantee provided by Bank for International Settlements (BIS),
International Monetary Fund (IMF) as well as Multilateral Development Banks
as referred to in Reserve Bank of India (Commercial Banks – Prudential Norms
on Capital Adequacy) Directions, 2025.
F. General Provisions
30. EMI programmes on Credit Card are governed specifically by the Reserve Bank
of India (Commercial Banks – Credit Cards and Debit Cards: Issuance and
Conduct) Directions, 2025. Such transactions shall not be covered under this
Chapter. However other loan products offered on Credit Cards which are not
covered / envisaged under the aforesaid Directions shall be governed by the
stipulations laid down under this Chapter. Further, this Chapter shall also be
applicable to all loans offered on Debit Card, including EMI programmes.
31. DLG arrangements entered between a bank and their LSP conforming to the
instructions laid down in this Chapter shall neither be treated as “synthetic
securitisation” as defined under the Reserve Bank of India (Commercial Banks –
Securitisation Transactions) Directions, 2025, nor attract the provisions of ‘loan
participation’ as defined under the Reserve Bank of India (Commercial Banks –
Transfer and Distribution of Credit Risk) Directions, 2025.


Chapter IV - Lending against Gold and Silver Collateral
Background: Reserve Bank has restricted lending against primary gold such as gold
bullion due to broader macro-prudential concerns as also due to speculative and non-
productive nature of gold. However, banks have been permitted to lend against the
collateral security of gold jewellery, ornaments and coins for meeting the short-term
financing needs of borrowers. The extant regulations are guided, inter alia, by the
objective of providing the borrowers an avenue to tide over their tight liquidity
conditions by leveraging the gold jewellery, ornaments or coins that are kept idle, while
simultaneously addressing the risks for the lenders. Similar concerns and objectives
guide a few regulations issued in the past on lending against the collateral of silver.
32. 16[*****]
A. General Provisions
33. The credit policy (hereinafter called the policy) of a bank, as required in terms of
paragraph 5 of these Directions, shall include, inter alia, appropriate single
borrower limits and aggregate limits for the portfolio of loans against collateral of
jewellery, ornaments or coins made of gold or silver (“eligible collateral” for this
Chapter); maximum LTV ratio permissible for such loans; action to be taken in
cases of breach of LTV ratio; valuation standards and norms; and standards of
gold and silver purity. The policy shall also include appropriate documentation to
be obtained and maintained for loans proposed to be categorised under priority
sector lending.
34. A bank may decide on a suitable approach for lending against eligible collateral as
part of its credit risk management framework, consistent, inter alia, with the
principle of proportionality and ease of access for small ticket loans. However,
detailed credit assessment, including assessment of borrower’s repayment
capacity shall be undertaken in case the total loan amount against eligible
collateral is above ₹2.5 lakh to a borrower.
Provided that in case of Bullet repayment loans, the threshold loan amount for
detailed credit assessment shall be the total amount payable at maturity.

16 Deleted with effect from April 1, 2026


35. A bank may renew an existing loan or sanction a top-up loan upon a formal request
from the borrower, subject to a credit assessment in accordance with paragraph
34. Such renewal or top-up shall be permitted only within the permissible LTV, and
provided the loan is classified as standard. Further, renewal of bullet repayment
loan shall be allowed only after payment of accrued interest, if any. The bank shall
ensure that such renewals and top-ups are clearly identifiable in its Core Banking
System or Loan Processing System.
B. Restrictions and Ceilings
36. A bank shall not grant any advance or loan:
(1) For purchase of gold in any form including primary gold, ornaments, jewellery,
or coins, or for purchase of financial assets backed by gold, e.g., units of
Exchange-traded funds (ETFs) or units of Mutual Funds; and
(2) against primary gold or silver or financial assets backed by primary gold or
silver.
Provided that a bank may extend need-based working capital finance to
borrowers who use gold or silver as a raw material or as an input in their
manufacturing or industrial processing activity, where such gold or silver can
also be accepted as security. A bank extending such finance shall ensure that
borrowers do not acquire or hold gold for investment or speculative purposes.
37. A bank shall not extend a loan where ownership of the collateral is doubtful. A
suitable document or declaration shall be obtained from the borrower in all cases
to the effect that the borrower is the rightful owner of the eligible collateral. Multiple
or frequent sanction of loans against eligible collateral to the same borrower,
aggregating to a value in excess of a threshold to be decided by the lender, must
be examined closely as part of the transaction monitoring under the anti-money
laundering (AML) framework.
38. A bank shall not:
(1) Avail loans by re-pledging gold or silver pledged to it by its borrowers.
(2) Extend loans to other lenders, entities or individuals by accepting gold or silver
collateral pledged to such lenders, entities, or individuals by their borrowers as
collateral.


For removal of doubt, it is clarified that the above provision does not preclude a
lender from financing another lender against the security of underlying
receivables.
39. Tenor of consumption loans in the nature of bullet repayment loans shall be
capped at 12 months, which may be renewed in terms of paragraph 35.
40. Loans against ornaments and coins shall be subject to the following:
(1) The aggregate weight of ornaments pledged for all loans to a borrower shall
not exceed 1 kilogram for gold ornaments, and 10 kilograms for silver
ornaments.
(2) The aggregate weight of coin(s) pledged for all loans to a borrower shall not
exceed 50 grams in case of gold coins, and 500 grams in case of silver coins.
C. Valuation and Assaying of Gold and Silver collateral
41. Gold or silver accepted as collateral shall be valued based on the reference price
corresponding to its actual purity (caratage). For this purpose, the lower of
(1) the average closing price for gold or silver, as the case may be, of that specific
purity over the preceding 30 days, or
(2) the closing price for gold or silver, as the case may be, of that specific purity on
the preceding day, as published either by the India Bullion and Jewellers
Association Ltd. (IBJA) or by a commodity exchange regulated by the
Securities and Exchange Board of India (SEBI) shall be used.
42. If price information for the specific purity is not directly available, the lender shall
use the published price available for the nearest available purity and
proportionately adjust the weight of the collateral based on its actual purity to arrive
at valuation.
43. For the purpose of valuation, only the intrinsic value of the gold or silver contained
in the eligible collateral shall be reckoned and no other cost elements, such as
precious stones or gems, shall be added thereto.
D. Loan to Value Ratio (LTV)
44. The maximum LTV ratio in respect of consumption loans against the eligible
collateral shall not exceed LTV ratios as provided in the table below:


Total consumption loan
amount per borrower
Maximum LTV ratio
≤ ₹2.5 lakh
85 per cent
> ₹2.5 lakh & ≤ ₹5 lakh
80 per cent
> ₹5 lakh
75 per cent
Explanation: ‘Loan to Value (LTV) ratio’ on a day in this context means the ratio of
the outstanding loan amount to the value of the pledged collateral or security, as
the case may be, on that day. In case of bullet repayment loans, however, the LTV
calculation, and the loan amount, shall take into account the total amount
repayable at maturity.
45. The prescribed LTV ratio shall be maintained on an ongoing basis throughout the
tenor of the loan.
E. Other Provisions
46.  For conduct related aspects and collateral management, the bank shall be guided
by the instructions contained in Reserve bank of India (Commercial Banks -
Responsible Business Conduct), Directions, 2025.
47. The bank shall generally disburse loans into borrower’s bank accounts. Banks
shall comply with the Reserve Bank of India (Commercial Banks – Know Your
Customer) Directions, 2025. Provisions of Sections 269 SS and 269 T of the
Income Tax Act, 1961, and associated rules shall be complied with, as may be
applicable.
48. In case of bank transfers, the bank shall ensure that:
(1) Loan disbursals are made to the borrower’s account and not to a third-party
account;
Exceptions:
(i) Disbursals covered exclusively under statutory or regulatory mandate (of
RBI or of any other regulator),
(ii) Flow of money between lenders for co-lending transactions, and
(iii) Disbursals for specific end use, provided the loan is disbursed directly into
the bank account of the end-beneficiary.


(2) Loan servicing, repayment, etc. is executed by the borrower directly in the
bank’s account without any pass-through account or pool account of any third
party.
49. Running multiple loans simultaneously to a single borrower or a group of related
borrowers may be prone to misuse and susceptible to fraud. Consequently, such
practices shall be subject to stricter internal audit and supervisory examination.
50. For instructions on disclosure requirements, the bank shall be guided by the
instructions contained in Reserve Bank of India (Commercial Banks – Financial
Statements: Presentation and Disclosures) Directions, 2025.

17[
Chapter V - [Deleted]

51. *****
52. *****
53. *****
54. *****
55. *****
56. *****
57. *****
58. *****
59. *****
60. *****]

17 Deleted with effect from April 01, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities)
Amendment Directions, 2025 dated December 04, 2025.


18[
Chapter VA - Gold Metal Loans (GML)
A. Introduction
60A. The Gold Metal Loan (GML) scheme was launched in 1998 as per Export Import
Policy 1997-2002 and the Handbook of Procedures of the Exim Policy to address
the need of working capital finance of the jewellery industry. Over time, the scope
of the GML scheme has been broadened to cater to the changing business
requirement of the jewellery industry. This Chapter prescribes GML related
prudential guidelines to address and manage the risks inherent in extending GML
to borrowers.
B. Eligible Banks
60B. Nominated banks importing gold as per the provisions of the Master Direction –
Import of Goods and Services, as updated from time to time, may extend import-
linked GML to entities who either manufacture and / or sell jewellery in domestic
and / or export markets (collectively hereinafter referred to as ‘jewellers’).
Provided that, jewellers who are not manufacturers themselves, may borrow under
GML only for outsourcing their manufacturing of jewellery on job basis to any
manufacturing firms / artisans / goldsmiths.
60C. Designated banks implementing the GMS may extend GMS-linked GML to
following categories of borrowers:
(1) Jewellers for the purposes as specified in paragraph 60B above, and
(2) MMTC Limited for minting India Gold Coins (IGC).
C. General Instructions
60D. A bank shall lay down a lending and risk management policy for GML which shall,
inter alia, prescribe the categories of GML which the bank desires to undertake, a
limit on the quantity of gold that may be lent per borrower as well as total quantity
of such loans that may be outstanding at any point of time. The policy shall also

18 Inserted with effect from April 01, 2026 vide Reserve Bank of India (Commercial Banks - Credit Facilities)
Amendment Directions, 2025 dated December 04, 2025.


lay down the detailed due-diligence requirements for deciding the eligibility of GML
borrowers and their credit requirements.
60E. GML shall be subject to capital adequacy and other prudential requirements
applicable to a lender, similar to any other loan exposure. For all prudential and
accounting purposes, GML shall be valued daily at an amount arrived at by
converting the gold quantity lent into Indian Rupees by crossing LBMA (London
Bullion Market Association) Gold AM price fixing for Gold / US Dollar rate with the
Indian Rupee-US Dollar reference rate.
60F. GML shall not involve any direct or indirect liability of the borrowers towards the
lenders’ source of the gold, i.e., the overseas supplier of gold (consignor) or the
GMS gold deposit account holder.
60G. A bank shall put in place mechanism to monitor on an ongoing basis the
exposure level and the end-use of the gold being lent to borrowers under GML
scheme and ensure that the gold borrowed under GML scheme is neither sold nor
exported by borrowers in the form of primary gold.
60H. A bank may extend GML to jewellers who are not their regular customers by
accepting stand-by letter of credit (SBLC) or bank guarantee (BG) denominated in
INR, issued by other scheduled commercial banks that maintain business
accounts of the jewellers, notwithstanding any provisions of Chapter XVI of these
Directions. Such arrangements shall be subject to independent credit
assessments by both the GML providing bank and the SBLC / BG issuing bank.
Further, the SBLC / BG issuing bank shall maintain adequate margin, during the
tenor of the loan, consistent with the volatility of the gold prices.
60I. A bank may decide interest rates on GML based on costs of procuring and holding
gold, and relevant spreads as per their interest rate policies.
D. Repayment of GML
60J. In case of lending to jewellery exporters, the repayment tenor of GML shall be
fixed by a bank subject to the terms and conditions of the extant Foreign Trade
Policy (FTP) and the Handbook of Procedures of the FTP.


60K. For all GML other than lending to jewellery exporters, a bank may fix a repayment
tenor as per its policy, in alignment with working capital cycle of the jeweller,
subject to a ceiling of 270 days.
60L. Repayment of GML (both principal and interest amounts) shall be made in INR,
calculated on the basis of prevailing value of the gold lent.
Provided that, in respect of GMS-linked GML, a bank shall also provide an option
to the borrower to repay a part or full of the ‘principal amount’ in physical gold,
provided:
(1) repayment is made using locally sourced IGDS (India Good Delivery
Standards) / LGDS (LBMA’s Good Delivery Standards) gold;
(2) gold is delivered on behalf of the borrower to the bank directly by the refiner or
a central agency, acceptable to the bank, without the borrower’s involvement;
(3) the loan agreement contains details of the option to be exercised by the
borrower, acceptable standards and manner of delivery of gold for repayment;
(4) the borrower is apprised upfront, in a transparent manner, of the implications
of exercising the option.
E. Disclosures
60M. A bank shall report the GML data to the Reserve Bank on a quarterly basis by
seventh day of the following month as per the format given in Annex - V.]


Chapter VI - Microfinance
A. Definition of Microfinance
61. A microfinance loan is defined as a collateral-free loan given to a household having
annual household income up to ₹3,00,000. For this purpose, the household shall
mean an individual family unit, i.e., husband, wife and their unmarried children.
62. All collateral-free loans, irrespective of end use and mode of application /
processing / disbursal (either through physical or digital channels), provided to low-
income households, i.e., households having annual income up to ₹3,00,000 shall
be considered as microfinance loans.
Explanation: To ensure collateral-free nature of the microfinance loan, the loan
shall not be linked with a lien on the deposit account of the borrower or backed by
hypothecation of any security.
B. Assessment of Household Income
63. Each bank shall put in place a board-approved policy for assessment of household
income. Indicative methodology for assessment of household income is outlined
below:
(1) For undertaking the income assessment of a low-income household,
information related to following parameters may be captured by the lender:
(i) Parameters to capture household profile
(a) Composition of the household
i.
Number of earning members
ii. Number of non-earning members
(b) Type of accommodation (owned / rented, etc.)
(c) Availability of basic amenities (electricity, water, toilet, sewage, LPG
connection, etc.)
(d) Availability of other assets (land, livestock, vehicle, furniture,
smartphone, electronic items, etc.)
(ii) Parameters to capture household income
(a) Primary source of income
i.
Sector
of
work
(Agriculture
&
allied
activities,
trading,
manufacturing, services, etc.)


ii. Nature of work (Self-employed or salaried, regular or seasonal,
etc.)
iii. Frequency of income (daily / weekly / monthly)
iv. Months / days of employment over last one year
v. Self-reported monthly income
vi. Average monthly income (to be derived from (iv) & (v) above)
(b) Other sources of income
i.
Remittance
ii. Rent / Lease
iii. Pension
iv. Government transfer
v. Scholarship
vi. Others (specify details)
(c) The income assessment as above may be carried out for all earning
members with respect to all sources (primary or secondary) of income.
While assessing income of all members from all sources, it may be
ensured that there is no double counting of income such as counting of
salary income of one migrant member also as remittance income for
the household.
(d) While the income computation may be done on a monthly basis, the
income assessment for all members and sources may be carried out
over a period of minimum one year to ascertain the stability of the
household income.
(iii) Parameters to capture household expenses
(a) Regular monthly expenses (food, utilities, transport, house / shop rent,
clothing, regular medical costs, school / college fees, etc.)
(b) Irregular expenses over last one year (medical expenses, house
renovation, purchase of household goods, functions, etc.)
(2) Self-reported income at 1(ii) above may be corroborated with the profile of
household at 1(i) and household expenses at 1(iii). Further, household income
may also be verified from other sources (bank account statements of the
borrowers, group members, other references in the vicinity, etc.).


64. Self-regulatory organisations (SROs) and other associations / agencies may also
develop a common framework based on the indicative methodology. The banks
may adopt / modify this framework suitably as per their requirements with approval
of their boards.
65. Each bank shall mandatorily submit information regarding household income to
the Credit Information Companies (CICs). Reasons for any divergence between
the already reported household income and assessed household income shall be
specifically ascertained from the borrower(s) before updating the assessed
household income with CICs.
C. Limit on Loan Repayment Obligations of a Household
66. Each bank shall have a board-approved policy regarding the limit on the outflows
on account of repayment of monthly loan obligations of a household as a
percentage of the monthly household income. The limit on the outflows on account
of repayment of monthly loan obligations of a household shall be limited to a
maximum 50 per cent of the monthly household income.
Explanation: Any future expected income from the asset/ activity financed by a
microfinance loan shall not be included in the household income for the purpose
of calculating the indebtedness of the household.
67. The computation of loan repayment obligations shall take into account all
outstanding loans (collateral-free microfinance loans as well as any other type of
collateralized loans) of the household. The outflows capped at 50 per cent of the
monthly household income shall include repayments (including both principal as
well as interest component) towards all existing loans as well as the loan under
consideration.
68. Existing loans, for which outflows on account of repayment of monthly loan
obligations of a household as a percentage of the monthly household income
exceed the limit of 50 per cent, shall be allowed to mature. However, in such cases,
no new loans shall be provided to these households till the prescribed limit of 50
per cent is complied with.
69. Each bank shall provide timely and accurate data to the CICs and use the data
available with them to ensure compliance with the level of indebtedness. Besides,


the bank shall also ascertain the same from other sources such as declaration
from the borrowers, their bank account statements and local enquiries.
D. Other provisions
70. The bank shall have a board-approved policy to provide the flexibility of repayment
periodicity on microfinance loans as per borrowers’ requirement.
71.  The bank providing microfinance loans shall refer to:
(1) Reserve Bank of India (Commercial Banks – Interest Rates on Advances)
Directions, 2025 for pricing of loans.
(2) Reserve Bank of India (Commercial Banks – Responsible Business Conduct)
Directions, 2025 for instructions related to Key Fact Statement and guidelines
on conduct towards microfinance borrowers.
(3) Reserve Bank of India (Commercial Banks – Managing Risks in Outsourcing)
Directions, 2025 for instructions pertaining to responsibilities for outsourced
activities.


Chapter VII - Project Finance
The directions contained in this Chapter provide a harmonised framework for financing
of projects in infrastructure and non-infrastructure (including commercial real estate &
commercial real estate - residential housing) sectors by banks.
72. The directions contained in this Chapter shall not apply to projects where financial
closure has been achieved as on October 1, 2025 (the ‘Effective Date’ for this
Chapter) for which the prudential guidelines on project finance prevailing before
October 1, 2025, which otherwise shall be treated as repealed, shall apply.
However, any resolution of a fresh credit event and / or change in material terms
and conditions in the loan contract in such projects, subsequent to the effective
date, shall be as per the guidelines under the Reserve Bank of India (Commercial
Banks – Resolution of Stressed Assets) Directions, 2025.
A. Phases of Projects
73. For the purpose of application of prudential guidelines contained in this Chapter,
Projects shall be broadly divided into three phases namely:
(1) Design phase – This is the first phase which starts with the genesis of the
project and includes, inter-alia, designing, planning, obtaining all applicable
clearances / approvals till its financial closure.
(2) Construction phase – This is the second phase which begins after the financial
closure and ends on the day before the actual DCCO.
(3) Operational Phase – This is the last phase which starts with commencement
of commercial operation by the project on the day of the actual DCCO and
ends with full repayment of the project finance exposure.
B. Prudential Conditions Related to Sanction
74. The credit policy of a bank shall incorporate suitable clauses for sanction of project
finance exposures, taking into account inter alia the provisions under this Chapter.
75. For all projects financed by the bank, it shall be ensured that:
(1) Financial closure has been achieved and original DCCO is clearly spelt out and
documented prior to disbursement of funds.
(2) The project specific disbursement schedule vis-à-vis stage of completion of the
project is included in the loan agreement.


(3) The post DCCO repayment schedule has been realistically designed to factor
in the initial cash flows.
Provided that, the original or revised repayment tenor, including the
moratorium period, if any, shall not exceed 85 per cent of the economic life of
a project.
76. For a given project, original / extended / actual DCCO, as the case may be, shall
be same across all lenders to the project.
77. In under-construction projects where the aggregate exposure of the lenders is up
to ₹1,500 crore, no individual bank shall have an exposure which is less than 10
per cent of the aggregate exposure. For projects where aggregate exposure of all
lenders is more than ₹1,500 crore, the exposure floor for an individual bank shall
be 5 per cent or ₹150 crore, whichever is higher.
Provided that, the above minimum exposure requirements shall not apply post-
actual DCCO and banks may freely acquire from or sell exposures to other lenders,
in compliance with guidelines contained in the Reserve Bank of India (Commercial
Banks – Transfer and Distribution of Credit Risk) Directions, 2025. Prior to actual
DCCO, banks may acquire from or sell exposures to other lenders under a
syndication arrangement (as specified under the Reserve Bank of India
(Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025),
provided the share of individual bank is in adherence to the above limits.
78. A bank shall ensure that all applicable approvals / clearances for implementing /
constructing the project are obtained before financial closure. An indicative list of
such pre-requisite approvals / clearances includes environmental clearance, legal
clearance, regulatory clearances, etc., as applicable to the project.
19[Explanation: Where it is possible for a project to be operationalised as multiple
independent viable units, a bank may at its discretion finance such independent
units as separate projects with their own financial closure, provided each unit is
appraised ex-ante for standalone viability.]

19 Inserted with effect from July 15, 2026, vide Reserve Bank of India (Commercial Banks – Credit Facilities) Fifth
Amendment Directions, 2026 dated July 15, 2026.


79. Approvals / clearances which are contingent upon achievement of certain
milestones in terms of project completion shall be deemed to be applicable only
when such milestones are achieved. For example, consent to operate a boiler can
only be applied for after the construction of a boiler. Hence, the same shall not be
treated as an applicable mandatory pre-requisite at the time of financial closure.
C. Prudential Conditions Related to Disbursement and Monitoring
80. A bank shall ensure availability of sufficient land / right of way for all projects before
disbursement of funds, subject to the following minimum requirements:
(1) For infrastructure projects under PPP model – 50 per cent
(2) For all other projects (non-PPP infrastructure, and non-infrastructure including
CRE & CRE-RH) – 75 per cent
(3) For transmission line projects – as decided by the bank
20[Explanation: For the purpose of this paragraph, for projects in electricity
generation where the project scope involves both generation and transmission
(evacuation infrastructure), the right of way requirement for transmission may be
determined as per sub-paragraph (3).]
81. In case of infrastructure projects under PPP model, disbursement of funds shall
begin only after declaration of the Appointed Date or its equivalent, for the project.
However, in cases where non-fund based credit facilities may be mandated by the
concession granting authority as a pre-requisite for declaration of appointed date,
the bank may sanction such credit facilities, in adherence with the instructions on
non-fund based facilities as prescribed in Chapter XVI of these Directions.
82. Further, in respect of the exposures mentioned at paragraph 81 above, the original
DCCO documented in the financial closure document shall be modified to reflect
any change in the ‘Appointed Date’ by the Concession granting authority prior to
disbursement of funds by way of a supplementary agreement between a lender
and the debtor subject to reassessment of project viability and obtention of
sanction from appropriate authorities. A Techno-Economic Viability (TEV) study

20 Inserted with effect from July 15, 2026, vide Reserve Bank of India (Commercial Banks – Credit Facilities) Fifth
Amendment Directions, 2026 dated July 15, 2026.


shall be required for this purpose for all projects where the aggregate exposure of
all lenders is ₹100 crore or more.
83. The bank shall ensure that disbursal is proportionate to the stages of completion
of the project as also to the progress in equity infusion and other sources of
finance, agreed as part of financial closure and receipt of remaining applicable
clearances. The lender’s independent engineer (LIE) / architect shall certify the
stages of completion of the project.
84. A project finance account may be classified as NPA during any time before actual
DCCO as per record of recovery, in terms of the Reserve Bank of India
(Commercial banks - Income Recognition, Asset Classification and Provisioning)
Directions, 2025.
D. Other Provisions
85. Creation and Maintenance of Database - Project specific data, in electronic and
easily accessible format, shall be captured and maintained by the bank on an
ongoing basis. A list of the relevant parameters which shall form part of project
finance database, at a minimum, is given below.
No
Parameters for Project Finance Database
1
Debtor Profile
Name of the Project/SPV, PAN, LEI, Name(s) of the Sponsor, Shareholding details,
Banking Arrangement, Sector, Sub-Sector.
2
Original Project Profile
Nature of Project, External Credit Rating, Economic Life, Date of Financial Closure, original
Date of Commencement of Commercial Operations, Total project cost excluding IDC, IDC,
Capital Structure, D/E, DSCR, Repayment Tenor, Repayment Start Date, Repayment
Frequency.
3
Change in DCCO
Date of Change, reason for change, extended DCCO, revised project debt, revised project
total cost, increase in cost, cost overrun, % of total increase financed by equity, % of total
increase financed by debt, revised D/E, revised DSCR, revised repayment tenor, revised
repayment start date, revised repayment frequency, revised external credit rating.
4
Credit event other than deferment of original/extended DCCO
Date of Change, reason, total increase in project cost, % of project cost financed through
equity, % of project cost financed through debt, revised D/E, revised DSCR, revised
repayment tenor, revised repayment start date, revised repayment frequency, revised
external credit rating.


5
Current Specification of the Project
Asset classification, original/ extended DCCO, economic life, external rating, total
outstanding, provision held, current project cost excluding IDC, IDC, current capital
structure, D/E, DSCR, repayment tenor, repayment frequency.
86. The bank shall update any change in parameters of a project finance exposure at
the earliest, but not later than 15 days from such change. The necessary system
in this regard shall be put in place within three months of the effective date.
87. The bank shall make appropriate disclosures in their financial statements, under
‘Notes to Accounts’, as specified in the Reserve Bank of India (Commercial Banks
– Financial Statements: Presentation and Disclosures) Directions, 2025.


Chapter VIII - Credit Facilities to Real Estate Sector
A. Loans and advances to Real Estate Sector
88. A bank shall put in place a comprehensive Board-approved policy relating to the
ceiling on the total amount of real estate loans, single / group exposure limits for
such loans, margins, security, repayment schedule and availability of
supplementary finance.
B. Housing Finance
89. The bank shall take into account the following directions while formulating their
policy and ensure that bank credit is used for productive construction activities and
not for activities connected with speculation in real estate. The following shall fall
under the definition of Housing Finance:
B.1
Acquisition of Land
90. Bank finance may be granted for purchase of a plot, provided a declaration is
obtained from the borrower that he intends to construct a house on the said plot,
with the help of bank finance or otherwise, within such period as may be laid down
by the banks themselves.
B.2
Construction of Building / Ready-built House
91. The bank granting loans / financing for construction of building or ready built house
shall be guided by the following:
(1) The bank may grant loans to individuals for purchase / construction of dwelling
unit per family and loans for repairs to the damaged dwelling units of families.
(2) The bank may extend finance to a person who already owns a house in town /
village where they reside, for buying / constructing a second house in the same
or other town / village for the purpose of self-occupation.
(3) The bank may extend finance for purchase of a house by a person who
proposes to let it out on rental basis on account of their posting outside the
headquarters or because they have been provided accommodation by their
employer.
(4) The bank may extend finance to a person who proposes to buy the house
where they are presently residing as a tenant.


(5) The bank may finance for construction meant for improving the conditions in
slum areas for which credit may be extended directly to the slum-dwellers on
the guarantee of the Government, or indirectly to them through the State
Governments.
(6) The bank may provide credit for slum improvement schemes to be
implemented by Slum Clearance Boards and other public agencies.
92. The bank shall adhere to the following conditions, in the light of the observations
of Delhi High Court on unauthorized construction:
(1) In cases where the applicant owns a plot / land and approaches the bank for a
credit facility to construct a house, a copy of the sanctioned plan by competent
authority in the name of a person applying for such credit facility shall be
obtained by the bank before sanctioning the home loan.
(2) An affidavit-cum-undertaking shall be obtained from the persons applying for
such credit facility that they shall not violate the sanctioned plan, construction
shall be strictly as per the sanctioned plan and it shall be the sole responsibility
of the executants to obtain completion certificate within 3 months of completion
of construction, failing which the bank shall have the power and the authority
to recall the entire loan with interest, costs and other usual bank charges.
(3) An Architect appointed / empanelled by the bank shall also certify at various
stages of construction of building that the construction of the building is strictly
as per sanctioned plan and shall also certify at a particular point of time that
the completion certificate of the building issued by the competent authority has
been obtained.
(4) In cases where the applicant approaches the bank for a credit facility to
purchase a built-up house / flat, it shall be mandatory for them to declare by
way of an affidavit-cum-undertaking that the built up property has been
constructed as per the sanctioned plan and /or building bye-laws and as far as
possible has a completion certificate also.
(5) An Architect appointed / empanelled by the bank shall also certify before
disbursement of the loan that the built-up property is strictly as per sanctioned
plan and / or building byelaws.


(6) No loan should be given in respect of those properties which fall in the category
of unauthorized colonies unless and until they have been regularized and
development and other charges paid.
(7) No loan should also be given in respect of properties meant for residential use
but which the applicant intends to use for commercial purposes and declares
so while applying for loan.
B.3
Supplementary Finance
93. The Bank may consider requests for additional finance within the overall ceiling for
carrying out alterations / additions / repairs to the house / flat already financed by
them.
94. In the case of individuals who might have raised funds for construction / acquisition
of accommodation from other sources and need supplementary finance, the bank
may extend such finance after obtaining pari passu or second mortgage charge
over the property mortgaged in favour of other lenders and / or against such other
security, as it may deem appropriate.
95. The Bank may consider granting finance to –
(1) The bodies constituted for undertaking repairs to houses, and
(2) The owners of building / house / flat, whether occupied by themselves or by
tenants, to meet the need-based requirements for their repairs / additions, after
satisfying itself regarding the estimated cost (for which requisite certificate
should be obtained from an Engineer / Architect, wherever necessary) and
obtaining such security as deemed appropriate.
B.4
Exclusions under Housing Finance
96. The bank shall not grant finance for the following:
(1) Construction of buildings meant purely for Government / Semi-Government
offices, including Municipal and Panchayat offices. However, the bank may
grant loans for activities, which will be refinanced by institutions like NABARD.
(2) Projects undertaken by public sector entities which are not corporate bodies
(i.e. public sector undertakings which are not registered under Companies Act
or which are not Corporations established under the relevant statute) shall not
be financed by the bank. Even in respect of projects undertaken by corporate


bodies, as defined above, the bank shall satisfy itself that the project is run on
commercial lines and that bank finance is not in lieu of or to substitute
budgetary resources envisaged for the project. The loan could, however,
supplement budgetary resources if such supplementing was contemplated in
the project design. Thus, in the case of a housing project, where the project is
run on commercial lines, and the Government is interested in promoting the
project either for the benefit of the weaker sections of the society or otherwise,
and a part of the project cost is met by the Government through subsidies
made available and / or contributions to the capital of the institutions taking up
the project, the bank finance shall be restricted to an amount arrived at after
reducing from the total project cost the amount of subsidy / capital contribution
receivable from the Government and any other resources proposed to be
made available by the Government.
(3) Banks had, in the past, sanctioned term loans to Corporations set up by
Government like State Police Housing Corporation, for construction of
residential quarters for allotment to employees where the loans were
envisaged to be repaid out of budgetary allocations. As these projects cannot
be considered to be run on commercial lines, the bank shall not grant loans to
such projects.
B.5
Lending to Housing Intermediary Agencies
97. The bank granting loans to housing Intermediary agencies shall be guided by the
following:
B.5.1. Financing of Land Acquisition
98. In view of the need to increase the availability of land and house sites for increasing
the housing stock in the country, the bank shall extend finance to public agencies
and not private builders for acquisition and development of land, provided it is a
part of the complete project, including development of infrastructure such as water
systems, drainage, roads, provision of electricity, etc. Such credit shall be
extended by way of term loans. The project shall be completed as early as possible
and, in any case, within three years, If the project covers construction of houses,
credit extended therefor in respect of individual beneficiaries shall be on the same
terms and conditions as stipulated for financing the beneficiary directly.


99. For valuation of properties including collaterals accepted for their exposures, the
bank shall be guided by the instructions contained in of Reserve Bank of India
(Commercial banks - Credit Risk Management), Directions, 2025.
100. For valuation of land for the purpose of financing of land acquisition as also land
secured as collateral, the bank shall be guided as under:
(1) The bank may extend finance to public agencies and not to private builders for
acquisition and development of land, provided it is a part of the complete
project, including development of infrastructure such as water systems,
drainage, roads, provision of electricity, etc. In such limited cases where land
acquisition can be financed, the finance is to be limited to the acquisition price
(current price) plus development cost. The valuation of such land as prime
security shall be limited to the current market price.
(2) Wherever land is accepted as collateral, valuation of such land shall be at the
current market price only.
B.5.2. Lending to Housing Finance Institutions
101. The bank granting term loans to housing finance institutions shall take into
account (long-term) debt-equity ratio, track record, recovery performance and
other relevant factors including the provisions of Chapter XIV of these Directions.
B.5.3. Lending to Housing Boards and Other Agencies
102. The bank may extend term loans to state level housing boards and other public
agencies keeping in view the past performance of these agencies in the matter of
recovery from the beneficiaries and shall also stipulate that the Boards will ensure
prompt and regular recovery of loan instalments from the beneficiaries.
B.5.4. Term Loans to Private Builders
103.  The bank may extend credit to private builders on commercial terms by way of
loans linked to each specific project.
104.  The bank shall not extend fund based or non-fund based facilities to private
builders for acquisition of land even as part of a housing project.
105. The period of credit for loans extended by a bank to private builders may be
decided by the bank itself based on its commercial judgment subject to usual
safeguards and after obtaining such security, as it shall deem appropriate.


106. Such credit may be extended to builders of repute, employing professionally
qualified personnel. It shall be ensured, through close monitoring, that no part of
such funds is used for any speculation in land.
107. Care shall be taken to see that prices charged from the ultimate beneficiaries
do not include any speculative element, that is, prices shall be based only on the
documented price of land, the actual cost of construction and a reasonable profit
margin.
B.5.5. Terms and Conditions for Lending to Housing Intermediary Agencies
108. The bank may grant term loans to housing intermediary agencies against the
direct loans sanctioned / proposed to be sanctioned by the latter, irrespective of
the per borrower size of the loan extended by these agencies.
109. The bank may grant term loans to housing intermediary agencies against the
direct loans sanctioned / proposed to be sanctioned by them to Non-Resident
Indians(NRIs) also. However, the bank shall ensure that housing finance
intermediary agencies being financed by it are authorised by the Reserve Bank to
grant housing loans to NRIs as all housing finance intermediaries are not
authorised by the Reserve Bank to provide housing finance to NRIs.
110. Lending to housing intermediary agencies shall be subject to the instructions
on Commercial Real Estate exposure, as outlined in paragraphs 125 to 133 of
these Directions.
B.6
Quantum of Loan
111. The bank shall abide by the following Loan to Value (LTV) and Risk Weights
(RWs) while deciding the quantum of loan to be granted as housing finance:
Category of Loan
LTV
Ratio (%)
Risk Weight (%)
(a) Individual Housing Loans

Up to ₹30 lakh
≤ 80
35
> 80 and ≤ 90
50
Above ₹30 lakh & up to ₹75 lakh
≤ 80
35
Above ₹75 lakh
≤ 75
50
(b) CRE – RH#
NA
75


# CRE-RH has been defined at paragraph 131.
Provided that the LTV ratios and Risk Weights for Claims secured by residential
property for loans sanctioned till June 06, 2017 shall be as set out below
Category of loan
LTV ratio (%) Risk weight (%)
(a) Individual Housing Loans
(i) Up to ₹30 lakh
≤80
35
>80 and ≤90
50
(ii) Above ₹30 lakh and up to ₹75 lakh
≤75
35
>75 and ≤80
50
(iii) Above ₹75 lakh
≤75
75
(b) Commercial real estate – residential housing
(CRE-RH)
N A
75
(c) Commercial Real Estate (CRE)
N A
100
112. As a counter cyclical measure, for Individual Housing Loans sanctioned on or
after October 16, 2020, and up to March 31, 2023, the risk weights shall be as
under:
LTV Ratio (%) Risk Weight (%)
≤ 80
35
> 80 and ≤ 90
50
113. In order to have uniformity in the practices adopted for deciding the value of the
house property while sanctioning housing loans, bank shall not include stamp duty,
registration and other documentation charges in the cost of the housing property
it finances so that the effectiveness of LTV norms is not diluted.
Exemption: In cases where the cost of the house / dwelling units does not exceed
₹10 lakh, the bank may add stamp duty, registration and other documentation
charges to the cost of the house/dwelling unit for the purpose of calculating LTV
ratio.
B.7
Innovative Housing Loan Products – Upfront Disbursal of Housing Loans
114. It has been observed that some banks have introduced certain innovative
Housing Loan Schemes in association with developers / builders, e.g., upfront


disbursal of sanctioned individual housing loans to the builders without linking the
disbursals to various stages of construction of housing project, Interest / EMI on
the housing loan availed of by the individual borrower being serviced by the
builders during the construction period/ specified period, etc. This might include
signing of tripartite agreement between the bank, the builder and the buyer of the
housing unit. These loans products are popularly known by various names like
80:20, 75:25 schemes etc.
115. Such housing loan products are likely to expose the banks as well as their home
loan borrowers to additional risks e.g., in case of dispute between individual
borrowers and developers / builders, default / delayed payment of interest / EMI
by the developer / builder during the agreed period on behalf of the borrower, non-
completion of the project on time etc. Further, any delayed payments by
developers / builders on behalf of individual borrowers to banks may lead to lower
credit rating / scoring of such borrowers by CICs as information about servicing of
loans get passed on to the CICs on a regular basis. In cases, where bank loans
are also disbursed upfront on behalf of their individual borrowers in a lump-sum to
builders / developers without any linkage to stages of constructions, banks run
disproportionately higher exposures with concomitant risks of diversion of funds.
116. Disbursal of housing loans sanctioned to individuals shall be closely linked to
the stages of construction of the housing project / houses and upfront disbursal
shall not be made in cases of incomplete / under-construction / green field housing
projects.
117. However, in cases of projects sponsored by Government / Statutory Authorities,
the bank may disburse the loans as per the payment stages prescribed by such
authorities, even where payments sought from house buyers are not linked to the
stages of constructions, provided such authorities have no past history of non-
completion of projects.
118. It is emphasized that the bank while introducing any kind of product shall take
into account the customer suitability and appropriateness and also ensure that the
borrowers / customers are made fully aware of the risks and liabilities under such
products.


B.8
 Disclosure Requirements
119. In view of the observations of Hon’ble High Court of Judicature at Bombay,
while granting finance to specific housing / development projects, the bank shall
stipulate as a part of the terms and conditions that:
(1) the builder / developer / company shall disclose in the Pamphlets / Brochures
etc., the name(s) of the bank(s) to which the property is mortgaged.
(2) the builder / developer / company shall append the information relating to
mortgage while publishing advertisement of a particular scheme in
newspapers / magazines etc.
(3) the builder / developer / company shall indicate in their pamphlets / brochures,
that they shall provide No Objection Certificate (NOC) / permission of the
mortgagee bank for sale of flats / property, if required.
(4) The bank shall ensure compliance of the above terms and conditions and funds
shall not be released unless the builder / developer / company fulfils the above
requirements.
(5) The above-mentioned provisions will be mutatis-mutandis, applicable to
Commercial Real Estate also.
120. Approvals from Statutory / Regulatory Authorities:
While appraising loan proposals involving real estate, the bank shall ensure that
the borrowers obtain prior permission from government / local governments / other
statutory authorities for the project, wherever required. In order that the loan
approval process is not hampered on account of this, while the proposals could be
sanctioned in normal course, the disbursements shall be made only after the
borrower has obtained requisite clearances from the government authorities.
121. Housing Loans Under Priority Sector
The grant of housing loan for the purpose of the priority sector lending targets
including reporting requirements will additionally be subject to the instructions on
“Priority Sector Lending” as amended from time to time.
122. National Building Code (NBC)
The Bank shall adhere to the National Building Code (NBC) formulated by the
Bureau of Indian Standards (BIS), considering the importance of safety of buildings