RBI sets transaction-level materiality thresholds on related-party loans

The Reserve Bank of India (RBI) has tightened oversight on lending to related parties by prescribing transaction-level materiality thresholds, above which loans will require approval from a bank’s board or a dedicated committee, according to the Reserve Bank of India (Commercial Banks – Credit Risk Management) Amendment Directions, 2026.

 

According to the RBI, loans to related parties that are not otherwise prohibited under the Banking Regulation Act, 1949, or under the RBI’s directions, will be subject to materiality thresholds linked to the size of a bank’s balance sheet. The thresholds will apply at the individual transaction level, the RBI said.

 

For banks with assets exceeding Rs 10 trillion, the ceiling for the materiality threshold has been set at Rs 25 crore. Banks with assets between Rs 1 trillion and Rs 10 trillion will have a ceiling of Rs 10 crore, while banks with assets below Rs 1 trillion will be subject to a Rs 5 crore ceiling. Asset size will be determined based on the last audited balance sheet.

 

The norms exclude credit facilities that are fully secured by cash or liquid securities—subject to prescribed loan-to-value and valuation norms—as well as interbank loans.

 

While banks may prescribe different materiality thresholds for various categories of related-party loans in their internal credit policies, any loan breaching the prescribed threshold must be sanctioned either by the board or by the Committee on Lending to Related Parties. Loans below the threshold may be approved by authorities to whom lending powers have been delegated.