Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to credit facilities like loans to real estate sector, project finance, partial credit enhancement (PCE), etc.
To whom are the directions applicable?
The directions are applicable to the following Regulated Entities (REs) –
- Commercial Banks
- Small Finance Banks (SFBs)
- Local Area Banks (LABs)
- Regional Rural Banks (RRBs)
- Primary (Urban) Co-operative Banks (UCBs)
- Rural Co-operative Banks –
- State Co-operative Banks (StCBs)
- Central Co-operative Banks (CCBs)
- All India Financial Institutions (AIFIs) regulated by RBI –
- Export Import Bank of India (EXIM Bank)
- National Bank for Agriculture and Rural Development (NABARD)
- National Housing Bank (NHB)
- Small Industries Development Bank of India (SIDBI)
- National Bank for Financing Infrastructure and Development (NaBFID)
- Non-Banking Financial Companies (NBFCs) for all layers –
- Deposit taking NBFC (NBFC-D)
- NBFC-Investment and Credit Companies (NBFC-ICC)
- NBFC-Factor
- NBFC-Micro Finance Institutions (NBFC-MFI)
- NBFC-Infrastructure Finance Company (NBFC-IFC)
- Infrastructure Debt Fund-NBFC (IDF-NBFC)
- Housing Finance Company (HFC)
To whom are the directions partially applicable?
The prudential regulations are not applicable to ‘NBFCs-Base Layer (NBFC-BL) having customer interface but not availing public funds’, however, conduct-related regulations are applicable to such NBFCs.
To whom are the directions not applicable?
The directions are not applicable to –
- Mortgage Guarantee Company (MGC)
- NBFC-Account Aggregator (NBFC-AA)
- Standalone Primary Dealer (SPD)
- Non-Operative Financial Holding Company (NOFHC)
- NBFC not availing public funds and not having any customer interface
What are the directions for credit facilities to the real estate sector?
Commercial Banks and SFBs
- The bank shall abide by the following Loan to Value (LTV) ratios and risk weights while deciding the quantum of housing loan –
| Category of Loan | LTV Ratio (%) | Risk Weight (%) |
| 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 |
| Commercial Real Estate – Residential Housing (CRE-RH) | NA | 75 |
| Commercial Real Estate (CRE) | NA | 100 |
- The CRE-RH includes loans to builders / developers for residential housing projects (except for captive consumption) under the CRE segment. Integrated housing projects comprising some commercial space (e.g. shopping complex, school, etc.) may qualify as CRE-RH, provided that the commercial area in the residential housing project does not exceed 10% of the total Floor Space Index (FSI) of the project. In case the FSI of the commercial area exceeds 10%, the project loans shall be classified as CRE and not CRE-RH.
- A bank shall not include stamp duty, registration and other documentation charges in the cost of the housing property. However, 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 calculating the LTV ratio.
- The CRE-RH segment shall attract standard asset provisioning of 0.75% as against 1% for the CRE segment.
LABs and RRBs
- The bank shall abide by the following LTV ratios and risk weights while deciding the quantum of housing loan –
| Category of Loan | LTV Ratio (%) | Risk Weight (%) applicable to LAB | Risk Weight (%) applicable to RRB |
| Individual housing loans |
|
|
|
|
- Up to ₹20 lakh |
90 | 50 | 50 |
|
- Above ₹20 lakh & up to ₹75 lakh |
80 | 80 | 50 |
|
- Above ₹75 lakh |
75 | 75 | 75 |
| CRE-RH | NA | 75 | NA |
| CRE | NA | 100 | NA |
UCBs
- Housing loans to individuals shall be subject to the following ceilings –
| UCB Tier | Loan amount per dwelling unit |
| Tier 1 | ₹60 lakh |
| Tier 2 | ₹1.40 crore |
| Tier 3 | ₹2 crore |
| Tier 4 | ₹3 crore |
- The ceiling on loans to individuals for carrying out repairs / additions / alterations to their dwelling units shall be ₹10 lakh in metropolitan centres (population of 10 lakh and above) and ₹6 lakh in other centres.
- The prudential exposure limits for UCBs for a single borrower / party and a group of connected borrowers / parties shall be 15% and 25%, respectively, of their Tier-I capital.
- For Tier 1 and Tier 2 UCBs, the tenor of housing loans shall not exceed 20 years, including any moratorium period. Moratorium period in housing loans may be permitted up to the date of completion of construction, subject to a maximum of 24 months from the date of first disbursement of the loan.
- Tier 3 and Tier 4 UCBs are permitted to determine the tenor of housing loans, including moratorium periods, as per their Board-approved policies.
Rural Co-operative Banks
- Housing loans shall be repayable within 15 years, including moratorium or repayment holiday till completion of construction or 18 months from the date of first disbursement of the loan, whichever is earlier.
- The outgo on account of housing loan repayment (including principal and interest) should not exceed 30% of the borrower's income.
- The banks may also extend need-based credit up to ₹1 lakh to owners of houses / flats for repairs, additions, alterations, etc., whether it is owner occupied or tenant occupied after obtaining such security as the bank may deem appropriate.
- The banks may extend term loans to Housing Boards within their State, other governmental agencies or non-governmental agencies approved by National Housing Bank (NHB) / National Bank for Agriculture and Rural Development (NABARD) for the purpose of refinance, provided that not less than 75% of the units financed by the loan are meant for Economically Weaker Section (EWS) and Low-Income Group (LIG).
- The limits on residential housing loans to an individual borrower are as under –
| Category of the bank | Limit (per individual borrower) |
| StCBs / District Central Co-operative Banks (DCCBs) having assessed net worth less than ₹100 crore | ₹50 lakh |
| StCBs / DCCBs having assessed net worth equal to or more than ₹100 crore | ₹75 lakh |
- The banks should desist from financing CRE; however, they may extend finance to CRE-RH within the existing aggregate housing finance limit of 5% of their total assets.
- Standard asset provision of 0.75% and risk weight of 75% shall be maintained for CRE-RH advances.
What are the directions on project finance?
Commercial Banks, SFBs, UCBs, AIFIs and NBFCs
- The repayment tenor, including the moratorium period, if any, shall not exceed 85% of the economic life of a project.
- In under-construction projects where the aggregate exposure of the lenders is up to ₹1,500 crore, the exposure of an individual bank / AIFI / NBFC shall be at least 10% 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 / AIFI / NBFC shall be 5% or ₹150 crore, whichever is higher.
- A bank / AIFI / NBFC shall ensure availability of sufficient land / right of way for all projects before disbursement of funds, subject to the following minimum requirements –
- For infrastructure projects under Public Private Partnership (PPP) model – 50%
- For all other projects (non-PPP infrastructure, and non-infrastructure including CRE & CRE-RH) – 75%
- For transmission line projects – as decided by the bank / AIFI / NBFC
What are the directions on partial credit enhancement (PCE)?
Commercial Banks, SFBs, AIFIs, NBFCs
- A bank / AIFI / NBFC (in Middle Layer and above) may provide PCE to bonds issued by corporates / special purpose vehicles (SPVs) for funding all types of projects and to bonds issued by Non-deposit taking NBFCs with asset size of ₹1,000 crore and above registered with the RBI (including HFCs). PCE may also be provided to bonds issued by Municipal Corporations.
- The objective behind allowing banks / AIFIs / NBFCs to extend PCE is to enhance the credit rating of the bonds issued so as to enable corporates to access the funds from the bond market on better terms.
- PCE shall be a subordinated facility provided in the form of an irrevocable contingent line of credit which will be drawn in case of shortfall in cash flows for servicing the bonds and thereby may improve the credit rating of the bond issue.
- The contingent facility may, at the discretion of the PCE providing bank / AIFI, be made available as a revolving facility.
- The PCE exposure limit by a single bank / AIFI / NBFC as well as the aggregate exposure limit of all PCE providers towards the PCE for a given bond issue has been capped at 50% of the bond issue size.
- A bank / AIFI / NBFC may offer PCE only in respect of bonds whose pre-enhanced rating is not lower than ‘BBB-’ as issued by accredited External Credit Assessment Institutions (ECAIs).
- To be eligible for PCE, corporate bonds shall be rated by a minimum of 2 ECAIs at all times.
- The PCE providing bank / AIFI / NBFC shall observe the following exposure limits –
- PCE exposure by the bank / AIFI / NBFC to a single counterparty or group of counterparties shall be within the overall regulatory exposure limits applicable to the bank / AIFI / NBFC.
- The aggregate PCE exposure of the bank / AIFI / NBFC shall not exceed 20% of its Tier 1 capital.
- The tenor of the bond issued by NBFCs / HFCs for which PCE is provided shall not be less than 3 years.
- The exposure of a bank / AIFI / NBFC by way of PCEs to bonds issued by each such NBFC / HFC shall be restricted to 1% of capital funds of the RE within the extant single / group borrower exposure limits.
- The capital required to be maintained by the RE providing PCE for a given bond issue shall be based on the PCE amount and the applicable risk weight for the RE corresponding to the pre-enhanced rating of the bond. For the purpose, lower of the 2 pre-enhanced credit ratings shall be reckoned.
What are other directions?
Commercial Banks and SFBs (updated as on June 23, 2026)
- 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 Unified Payments Interface (UPI), shall be solely determined by the nature of the underlying credit facility, governed in terms of the applicable prudential norms.
- The limits on unsecured advances to a single borrower within the aggregate ceiling of unsecured advances shall be as under –
| Category of UCB | Limit on unsecured advances to a single borrower |
| Tier 1 | ₹5 lakh |
| Tier 2 | ₹7.5 lakh |
| Tier 3 & 4 | ₹10 lakh |
References
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (All India Financial Institutions – Credit Facilities) Directions, 2025 (updated as on April 1, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12981&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (All India Financial Institutions - Prudential Norms on Capital Adequacy) Directions, 2025'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12983&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13156&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13159&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Local Area Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13078&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025 (Updated as on April 1, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12957&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12959&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Regional Rural Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13053&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13002&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13124&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13127&Mode=0
Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13028&Mode=0
Reserve Bank of India. (2026, June 23). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Fourth Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13528&Mode=0
Reserve Bank of India. (2026, April 27). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13395&Mode=0
Reserve Bank of India. (2026, June 23). 'Reserve Bank of India (Small Finance Banks – Credit Facilities) Third Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13527&Mode=0
Reserve Bank of India. (2026, April 29). 'Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) – Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13404&Mode=0
Comments
Post a Comment