Overview

• The draft seeks a harmonised, principle-based framework for regulated entities to govern lending to related parties.
• Board or board-committee approval would be required above set thresholds: Rs 50 crore for lenders with assets of Rs 10 lakh crore or more, Rs 10 crore for those between Rs 1 lakh crore and Rs 10 lakh crore, and Rs 5 crore for lenders below Rs 1 lakh crore.
• The RBI states the objectives as ensuring prudence while preserving operational flexibility for banks.
• The central bank warns that lending to connected counterparties can create conflicts of interest and moral hazard, noting that global regimes address such risks.
• The initiative builds on statutory limits in the Banking Regulation Act, 1949 and prior rules for directors, their relatives, and senior officers, extending oversight to related parties not covered earlier.