DRAFT RBI’s NON-BANKING FINANCIAL COMPANIES – LENDING TO RELATED PARTIES DIRECTIONS, 2025, ISSUED BY RBI WHICH IS OPEN FOR PUBLIC COMMENTS NOW

  DRAFT RBI’s NON-BANKING FINANCIAL COMPANIES – LENDING TO RELATED PARTIES DIRECTIONS, 2025, ISSUED BY RBI WHICH IS OPEN FOR PUBLIC COMMENTS NOW 

WHY IT IS SIGNIFICANT? 

Because lending to promoters, directors, KMPs, their relatives or group entities has always carried the risk of conflict of interest and misuse. Regulators are now stepping in with clearer boundaries and stricter checks. 

 

SALIENT FEATURES OF NBFCS – LENDING TO RELATED PARTIES (2025) 

1. Applies to all NBFCs (including Housing Finance Companies HFCs). 

2. Related parties defined in great detail – covering not just individuals but also trusts, entities under control, and group companies. 
 
3. Materiality thresholds: loans above ₹10 crore (Top/Upper Layer), ₹5 crore (Middle Layer), ₹1 crore (Base Layer) need Board/Committee approval. 
 
4. Board-approved credit policy to specifically address related party lending. Board or designated committee approval will be required only for related‐party loans above certain thresholds (which vary by asset size). 
 
5. Recusal rules: no one can be part of a decision where they have interest. 
 
6. Regular internal audit checks, auditor reviews, and annual declarations by directors/KMPs. 
 
7. Semi-annual reporting to RBI and detailed financial statement disclosures. 
 
8. Penalties for non-compliance could range from monetary fines to forensic audits. 
 

9. Independent directors of other NBFCs will not be considered as “related parties” under the proposed regime. 

10. There is an emphasis on improved supervisory reporting and greater transparency, including disclosure of all transactions with related parties. 

Thus, enhanced disclosure / reporting would increase compliance burden, but also help monitoring of preferential or insider lending. 

R V SECKAR , FCS, LLB 79047 19295