Highlights of RBI Annual Report 2025-26 – Chapter 6 (Part I)

Reserve Bank of India (RBI) has published its annual report for the financial year 2025-26. In a series of articles, we will go through the highlights of the report. This is the third article in the series. 

Chapter 6 – Regulation, Supervision and Financial Stability (Part I)

• Opening of and operation in deposit accounts of minors by banks –
• Minors of any age can open and operate savings and term deposit accounts through his / her natural or legal guardian or with mother as guardian. 
• Minors above the age of 10 years may open and operate savings and term deposit accounts independently, if they so desire.
• Digital lending guidelines –
• Regulated Entities (REs) were mandated to ensure that lending service providers (LSPs) display all loan offers to borrowers when multiple lenders are involved. 
• A public directory of Digital Lending Apps (DLAs) was introduced to help borrowers verify their link with REs.
• Non-Banking Financial Companies (NBFCs) were allowed to consider Default Loss Guarantee (DLG) cover for determining provisions under the Expected Credit Loss (ECL) framework across all stages, subject to the requirements as laid down under Indian Accounting Standards (IndAS) which require, inter alia, the DLG arrangement to be integral to the contractual terms of the loan and not being recognised separately. 
• Qualifying asset criteria for NBFC-Microfinance Institutions (NBFC-MFIs) was revised from 75% of their total assets to 60% of total assets (netted off by intangible assets).
• Priority sector lending target for Small Finance Banks was revised from 75% to 60% of adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposures (CEOBE), whichever is higher.
• CareEdge Global IFSC Limited (CGIL) was accredited for rating of non-resident corporate exposures arising out of International Financial Services Centre (IFSC). 
• Revised guidelines on investment in Alternative Investment Funds (AIFs) capped the individual contribution of an RE to 10% of the corpus (20% collectively across REs).
• Partial credit enhancement (PCE) –
• The exposure limit by a single RE and the aggregate exposure limit of all REs towards PCE were capped at 50% of the bond issue size. 
• 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.
• Lending against gold and silver collateral –
• Scheduled commercial banks as also Tier 3 and Tier 4 urban co-operative banks (UCBs) were permitted to extend working capital loans to any borrower who requires gold as a raw material in manufacturing or industrial processing, beyond jewellers. 
• Loan-to-value (LTV) ratios were revised (85% for loans up to ₹2.5 lakh, and 80% for loans above ₹2.5 lakh but up to ₹5 lakh, with continuation of previous limit of 75% for loans above ₹5 lakh).
• Restriction on co-operative banks and Regional Rural Banks (RRBs) for bullet repayment of loans against gold collateral were removed.
• Gold Metal Loans –
• The entities who either manufacture and / or sell jewellery in domestic and / or export markets were included as eligible borrowers.
• Repayment tenor for non-exporters was extended up to 270 days, aligned with working capital cycles (revised upward from earlier 180 days).
• Trade relief measures –
• The exporters were offered moratorium period on all loans falling between September 01, 2025 and December 31, 2025.
• The credit period was extended to 450 days for pre-shipment and post-shipment export credit disbursed till June 30, 2026.
• Basic Savings Bank Deposit (BSBD) account – The following additional facilities to be provided free of charge, without any requirement of minimum balance –
• Cheque book with minimum 25 cheque leaves per year.
• Internet and mobile banking facility.
• Passbook or monthly statement of account in lieu of passbook, either in print or by e-mail, as per the request of the account holder.
• Pursuant to the enactment of the Banking Laws (Amendment) Act, 2025, the definition of ‘fortnight’ for the purpose of cash reserve ratio (CRR) and statutory liquidity ratio (SLR) maintenance and reporting by banks was amended from ‘the period from Saturday to the second following Friday, both days inclusive’ to ‘the period from the 1st day to the 15th day of each calendar month or 16th day to the last day of each calendar month, both days inclusive’.
• To address the risks arising from reciprocal or quid pro quo lending arrangements between banks, the concept of ‘Reciprocally Related Person’ was introduced. 
• Aggregate ceiling for unsecured advances by UCBs was revised to 20% of total loans and advances from the ceiling of 10% of total assets.
• Rural Co-operative Banks i.e. State Co-operative Banks and District Central Cooperative Banks were brought under the ambit of the Reserve Bank – Integrated Ombudsman Scheme, 2021, effective November 1, 2025.
• Rural Co-operative Banks were permitted to recognise income on accrual basis for standard assets and cash basis for non-performing assets (NPAs).
• Directions were issued on private placement of equity shares by National Urban Cooperative Finance and Development Corporation Ltd. (NUCFDC), umbrella organisation for UCBs.
• Banks acting as clearing members in equity and commodity derivatives on Securities and Exchange Board of India (SEBI)-recognised exchanges are required to maintain capital charge for counterparty credit risk. 
• The RBI announced the launch of Mission SAKSHAM (Sahakari Bank Kshamta Nirman) for UCBs – a sector wide capacity building and certification framework. The capacity building of the sector would be implemented through a large number of physical training programmes as well as a scalable learning platform, to cover about 1.4 lakh participants, across all functions.
• Co-lending guidelines –
• The framework previously limited to priority sector loans was expanded to all loans.
• Minimum share of individual loans to be retained by REs under co-lending agreement (CLA) was reduced from 20% to 10%.
• First-loss default guarantee cover was extended up to 5%.
• NBFCs with asset size of less than ₹1,000 crore, not accessing public funds and not having customer interface (including Type-I NBFCs), were exempted from the requirement to get registered with the RBI.
• Liquidity Coverage Ratio (LCR) guidelines – 
• 2.5% additional run-off factor for retail deposits and unsecured wholesale funding from non-financial small business customers with internet and mobile banking access.
• Haircuts on the market values of government securities (G-secs) classified as level 1 high quality liquid assets (HQLA) to match margin requirements under the liquidity adjustment facility (LAF) and marginal standing facility (MSF).
• Other legal entities (OLE) category shall consist of all deposit and other funding from banks / insurance companies and financial institutions and entities in the business of financial services.
• Know your Customer (KYC) guidelines – 
• Central KYC Record Registry (CKYCR) to be first reference point for KYC.
• Use of business correspondents (BCs) for KYC updation.
• No denial of services to public, especially the economically / socially disadvantaged, including the persons with disabilities (PwDs).
• All transactions allowed for low-risk individual customers and updation of KYC within 1 year from the due date or June 30, 2026, whichever is later.
• Mandatory intimations for periodic updation of KYC.
• The date of commencement of commercial operations (DCCO) was permitted to be deferred up to 2 years for non-infra and 3 years for infra without asset classification downgrade.
• Documentation was standardised to ease claim settlement for nominees and legal heirs in respect of deposit accounts, safe deposit locker and articles in safe custody of a deceased customer.
• Floating rate loans –
• Banks were permitted to reduce the spread components, excluding the credit risk premium, at a shorter periodicity than once in 3 years for customer retention, on justifiable grounds, in a non-discriminatory manner. 
• REs may, at their option, provide a choice to the borrowers to switch over to a fixed rate at the time of reset. 
• Scheme for Facilitating Accelerated Payout - Inoperative Accounts and Unclaimed Deposits –
• The RBI launched the Scheme to encourage the banks to actively pursue customers / depositors for re-activation of their inoperative accounts and return of their unclaimed amounts lying with Depositor Education and Awareness (DEA) Fund. 
• The Scheme aims to reduce both the stock of existing unclaimed deposits and fresh accretion of flows to the DEA Fund. 
• The Scheme will run for 1 year from October 1, 2025 to September 30, 2026.
• Maintenance of cash credit accounts, current accounts and overdraft accounts –
• Banks having a minimum 10% share (either in banking system’s aggregate exposure to a borrower or banking system’s aggregate fund-based exposure to a borrower) can maintain current accounts and overdraft accounts without restrictions. 
• Banks not meeting the criteria can maintain collection accounts or overdraft accounts (only in the nature of collection account).
• The amended directions on governance of UCBs and Rural Co-operative Banks prescribe a mandatory 3-year cooling-off period after 10 years of continuous tenure before a Director can re-join the same bank’s Board. The Directors may serve on other banks’ Boards during the cooling-off period if otherwise eligible.
• Liquidity risk stress testing framework for banks underwent comprehensive enhancement from a reverse liquidity stress testing model to a forward-looking model, which predicts ‘survival horizon’ / ‘days to failure’ for entities based on analysis of cash inflows and outflows.
• Frauds in banks –
• Although the number of frauds for public and private sector banks has reduced, the amount involved has increased over the years. 
• While the number of frauds was highest under card / internet / digital payments category during 2023-24 and 2024-25, advances category accounted for the largest share in 2025-26. 
• In value terms, frauds were concentrated in the advances category across the 3 years.
• As per the revised instructions on declaration of dividend by commercial banks, the banks with higher net profits, lower net NPAs and higher cushion in terms of capital adequacy are eligible to declare higher dividends.
• The publication of sDQI scores was initiated as envisaged under the Utkarsh 2.0. sDQI is a comprehensive and quantitative measure to assess the quality of data submitted by the reporting entities through supervisory returns. The index measures data quality across 4 dimensions, i.e., accuracy, completeness, timeliness and consistency.
• High-level bilateral exchanges were undertaken with Central Bank of Russia (CBR) and Monetary Authority of Singapore (MAS) for supervisory cooperation and exchange of best practices on key emerging topics related to stress testing, supervision of financial conglomerates and group risk assessment, climate risk, and micro-credit concerns.
• Discussions were held with Office of the Superintendent of Financial Institutions (OSFI), Canada and European Central Bank (ECB) regarding strengthening of home-host cooperation, supervisory priorities, and other related matters.

References

Reserve Bank of India. (2026, May 29). 'RBI Annual Report 2025-26'. Retrieved from https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx?year=2026

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