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ARTICLE · 09 OCTOBER 2025

From Co-Lending To Governance Reform: RBI's Expanding Prudential Framework

IndiaLaw LLP
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The Reserve Bank of India (RBI) has released the Draft Reserve Bank of India (Lending to Related Parties) Directions, 2025, inviting public comments until October 31, 2025.

IndiaFinance and Banking
Aditi Rana
Aditi Rana

Introduction

The Reserve Bank of India (RBI) has released the Draft Reserve Bank of India (Lending to Related Parties) Directions, 2025, inviting public comments until October 31, 2025. This marks a significant step towards establishing a unified, principle-based framework for transactions between regulated entities and their related parties, a long-standing area of concern for governance and prudential oversight in the Indian financial sector.

Background and Rationale

At present, restrictions on lending to related parties are scattered across multiple regulatory frameworks. For example, Section 20 of the Banking Regulation Act, 1949 restricts banks from granting loans to their directors or firms in which they are interested. Similar provisions exist for Non-Banking Financial Companies (NBFCs) and co-operative banks, but with differing thresholds, exceptions, and disclosure obligations.

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