A[U]n Expected Injury: ECL is here, likely to hurt bank profits and retained earnings in FY28

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Team Finserv | finserv@vinodkothari.com

Additionally, upfront fair valuation may also deplete retained earnings

The new ECL framework marks a major regulatory shift for India’s banking sector; it has been long overdue, and therefore, there was no case that the RBI could have deferred it further; pleadings to defer the implementation were rejected by the regulator. It comes coupled with regulatory floors for provisions, which would cause a major increase in provisioning requirements over the earlier requirements. Our assessment, on a very conservative basis, is that the first hit to Bank P/Ls will be at least Rs 60000 crores in the aggregate. 

This is in addition to fair valuation requirement on upfront adoption, as on 1st April, 2027. While a vaguely worded part in para 19 was inserted on suggestions of the stakeholders, if interest rates have moved up since the date of the original loan, there will be almost a sure case of upfront valuation loss, which will eat up retained earnings.

RBI had come up with a draft framework on ECL pursuant to the Statement on Developmental and Regulatory Policies, wherein it indicated its intention to replace the extant framework based on incurred loss with an ECL approach. The final regulations were notified on 26th April and are applicable w.e.f 1.04.2027 i.e., for FY 27-28. The manner of implementation will be that all loans as on 1st April 2027 will be fair valued, and all new loans/financial instruments originated or acquired on or after 1st April 2027 will be subject to ECL provisions. See the highlights of the final regulations here.

A major impact that the directions will have on the Banking sector is the need to maintain increased provisioning pursuant to a shift from an incurred loss framework to the ECL framework. Under the earlier framework, banks made provisions only after a loss has incurred, i.e., when loans actually turn non-performing. The newECL model, however, requires banks to anticipate potential credit losses and set aside provisions for such anticipated losses. 

Banks presently classify an asset as SMA1 when it hits 30 DPD, and SMA2 when it turns 60. Both these, however, are standard assets, which currently call for 0.4% provision. Under ECL norms, both these will be treated as Stage 2 assets, which calls for a lifetime probability of loss, with a regulatory floor of 5%. Thus, the differential provision here becomes 4.6%.  

Once an asset turns NPA, the present regulatory requirement is a 15% provision; the ECL framework puts these assets under Stage 3, where the regulatory minimum provision, depending on the collateral and ageing, may range from 25% to 100%. Our Table below gives a more granular comparison.

Type of assetAsset classificationExisting requirement New requirement w.e.f 1.04.2027Difference
Farm Credit, Loan to Small and Micro EnterprisesSMA 00.25%0.25%–
SMA 10.25%5%4.75%
SMA 20.25%5%4.75%
NPA15%25%-100% based on Vintage10%-85% based on Vintage
Commercial real estate loansSMA 01%Construction Phase -1.25%

Operational Phase – 1%		Construction Phase -0.25%

Operational Phase – Nil
SMA 11%Construction Phase -1.8125%

Operational Phase – 1.5625%		Construction Phase -0.8125%

Operational Phase – 0.5625%
SMA 21%Construction Phase -1.8125%

Operational Phase – 1.5625%		Construction Phase -0.8125%

Operational Phase – 0.5625%
NPA15%25%-100% based on Vintage10%-85% based on Vintage
Secured retail loans, Corporate Loan, Loan to Medium EnterprisesSMA 00.4%0.4%–
SMA 10.4%5% (0.4% for loans against FD, NSC, LIC and KVP)

(2.5% for direct exposures to/guaranteed by State Governments)		4.6%

No change for loans against FD, NSC, LIC and KVP
SMA 20.4%5%(0.4% for loans against FD, NSC, LIC and KVP)

(2.5% for direct exposures to/guaranteed by State Governments)		4.6%

No change for loans against FD, NSC, LIC and KVP
NPA15%25%-100% based on Vintage

10%-100% for loans against FD, NSC, LIC and KVP and for direct exposures to/guaranteed by State Government)		10%-85% based on Vintage
Exposures under various schemes of Credit Guarantee Fund Trust for Micro andSmall Enterprises (CGTMSE), Credit Risk Guarantee Fund Trust for Low IncomeHousing (CRGFTLIH) and National Credit Guarantee Trustee Company Ltd  (NCGTC)SMA 00.4%0.25%0.15%
SMA 10.4%0.25%0.15%
SMA 20.4%0.25%0.15%
NPANo provision for the guaranteed portion. 

NPA provisioning as per extant guidelines for the portion outstanding in excess of the guarantee

(Only when the Governmentrepudiates its guarantee when invoked)		10%-100% based on vintage for secured and guaranteed portion

25%-100% based on vintage for unsecured and unguaranteed portion

(Only if the claims are not settled with ninety datesfrom the due date of the loan)
Home LoansSMA 00.25%0.25%0.15%
SMA 10.25%1.5%1.25%
SMA 20.25%1.5%1.25%
NPA15%10%-100% based on Vintage(-)5% – 85% based on Vintage
LAPSMA 00.4%0.4%–
SMA 10.4%1.5%1.1%
SMA 20.4%1.5%1.1%
NPA15%10%-100% based on Vintage (-)5% – 85% based on Vintage
Unsecured Retail loanSMA 00.4%1%0.6%
SMA 10.4%5%4.6%
SMA 20.4%5%4.6%
NPA25%25%-100% based on Vintage0%-75% based on Vintage

The actual impact of such additional provisioning will be a hit of more than 3% to the profit of banks. Based on the RBI Financial Stability Report of FY 24-25, the current level of SMA and NPA is estimated to be ₹3,78,000 crores (2%) and ₹4,28,000 crores (2.3%), respectively. 
Accordingly, an additional provision of approximately ₹ 18,000 crores (4.6% of SMA volume) and ₹ 42,000 crores (10% of NPA volume) will be required for SMA and NPA respectively, leading to a total impact of at least ₹60,000 crores. This estimate has been arrived at by considering the % of NPAs and SMA-1 & SMA-2 portfolios of banks. The actual impact may be higher, as lot of loans may be unsecured, and may have ageing exceeding 1 year, in which case the differential provision may be higher.

It may be noted that while the draft directions allow Banks to add back the excess ECL provisioning to the CET 1 capital, it does not neutralize the immediate profitability impact, as the additional provisions would still flow through the profit and loss account.

How do we expect banks to smoothen this hit that may affect the FY 27-28 P/L statements? We hold the view that it will be prudent for banks, who have system capabilities, to estimate their ECL differential, and create an additional provision in FY 25-26, or do technical write-offs.

Effective Interest Rate requirement applies to all loans effective 1st April, 2027

ECL does not come alone; it comes along with the Ind AS 109 companion – the requirement to compute effective interest rate (EIR) for all financial assets and financial instruments. How does EIR requirement differ from the existing rate of interest/internal rate of return approach? Because EIR has the impact of amortising loan acquisition costs or upfront fees. Currently, banks could have taken the upfront earnings such as processing or origination fees/costs directly to revenue – these will now have to part of the EIR computation. More than impacting the profit number, EIR creates a significant impact on loan management systems, as it results in dual computations – the accounting balances and the customer LMS balances are likely to be different.

Upfront recognition of fair value changes

Para 19 requires that on 1st April, 2027, that is, the date of first adoption, all financial assets and instruments will be fair valued, and the fair value changes (gains or losses) will be adjusted against retained earnings. This is consistent with the principles of first time adoption of Ind AS.

On stakeholder representation, the RBI added this part to Para 19:

Where facts and circumstances indicate that the transaction has been undertaken on terms such that the fair value of the financial asset is not materially different from its carrying cost, the same shall be presumed to be the best evidence of fair value.

What does this imply? If the terms of the financial facility have remained the same, does it mean no fair valuation has to be done? Surely no, at least in our opinion. Any fair value change in fixed rate instruments happens for two reasons: change in credit spreads (rating changes, credit quality changes, etc), or change in rate of interest. If there is a facility extended, say at a rate of interest of 8%, whereas the prevailing rate of interest for a borrower of similar credit standing has moved up to 10%, will there be a fair value decrease? Surely yes.

There are lots of loans which were extended during Covid or periods of low interest rates, which are still continuing. In all such cases, fair value losses are imminent. 

The meaning of the para above can only be that if the terms of the original facility are similar to what they would currently be, then the fair value will not have to be computed.

See our other resources:

  1. Expected credit losses on loans: Guide for NBFCs
  2. Impact of restructuring on ECL computation

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Dividends Denied: Why InvIT SPV CashFlows Don’t Flow Up

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Simrat Singh | Finserv@vinodkothari.com

REITs and InvITs are often discussed together as parallel innovations in India’s capital markets, reflecting a push towards deploying capital in real estate and infrastructure. Both frameworks were introduced in 2014, share a trust-based structure and are subject to broadly similar regulatory principles, including mandatory cash distribution requirements and both also have a common tax provision in section 115UA of Income Tax Act, 1961 (section 223 in the 2025 Tax Act). Comparatively, InvITs have witnessed a significantly stronger growth, largely driven by the government’s sustained push towards infrastructure development. The data clearly reflects this divergence. As of April, 2026, there are 6 registered REITs and 28 InvITs in India, managing an AUM of ₹2,50,000 Crores and ₹6,20,000 Crores respectively. Among the InvITs, Road sector InvITs dominate the total AUM. (see our write-up on distribution of AUM of InvITs here). Notable, the national monetisation pipeline 2.0 proposed monetization of approx ₹3,35,000 Crores worth of highway assets under InvIT/TOT models (see our write-up on this here). 

While InvITs are required to distribute 90% of their cash flows, the underlying SPVs, mandated to be in company form, are constrained by dividend distribution rules that rely on accounting profits rather than actual cash generation. In sectors such as roads and power, where assets are finite-life concession rights or long term power purchase agreements, such assets are subject to heavy amortisation which leads to SPVs report book losses despite generating steady cash flows. As a result, cash exists within the SPV but cannot be upstreamed efficiently as dividends. This issue stems from treating InvITs on par with REITs despite differences in investments and nature of assets and from disallowing flexibility in the legal form of SPVs.

Industry workaround has been towards debt-heavy (thin capitalisation) structures, enabling distributions through interest and loan repayments, though these might raise tax issues (discussed below). Beyond such workarounds, more durable solutions are explored in line with international models like US Master Limited Partnerships and Singapore Business Trusts such as permitting dividend declarations based on cash flows rather than accounting profits, reconsidering the mandated company form of SPVs to allow more flexible structures such as trusts or LLPs etc.

Nature of investments by REITs and InvITs

REITs and InvITs are different in the sense that one invests in a property and looks at long term appreciation/rentals. The other looks at an infra asset which gives cash flows only for a certain period

REITs hold income-generating real estate assets with no fixed economic life. These assets can be retained, redeveloped/renovated or replaced over time. At the SPV level, there is no restriction on holding multiple assets and the portfolio of assets can be managed through acquisitions and divestments.

In contrast, InvITs, particularly in the road sector, hold assets that are inherently finite. These assets are in the form of concession rights and are intangible assets where the concessioning authority (usually NHAI) grants a right to operate and collect revenue for a defined period, say 15 to 20 years. Note that the road asset is not the asset that is taken on the balance sheet of the SPV, rather it is the intangible right to collect revenue on the road that is capitalised. At the end of the concession period, the asset reverts back to the concessioning authority, leaving no residual economic value. At this stage, the SPV merely becomes a shell entity, holding in itself only residual litigations or tax demands awaiting its eventual outcome of being wound-up.

Moreover, there are certain constraints imposed by the concession agreement entered into between the SPV and NHAI. Under standard concession agreements, each road project is required to be housed in a separate SPV. Which is why the name of the SPVs are in the style “[Name of Road Stretch] Tollway/Toll Road Private Limited”. The “one project, one SPV” model prevents aggregation of road assets within the same SPV and keeps the rights, obligations and risk allocation clearly demarcated. While this mandatory housing of each project in a separate private limited entity has its advantages, such as lender protection, bankruptcy remoteness and clarity in enforcement of contractual rights, it also creates rigidity for the InvIT. 

The inability to pool assets or recycle assets within the SPVs prevents capital recycling. Unlike REIT SPVs, InvIT SPVs cannot recycle capital either by selling assets or acquiring new ones within the same entity. As a result, while REITs can operate vehicles with a perpetual asset base, InvITs function as portfolios of wasting assets that are depleted over time and cannot be replaced within the same SPV. 

Distribution requirement and the dividend constraint

Both REITs and InvITs (and their SPVs/HoldCos) are required to distribute at least 90% of their net distributable cash flows. This distribution can occur through interest on loan, loan repayment or dividends from the SPVs. The challenge for InvITs arises at the SPV level, in the case of dividend distribution. Under Section 123 of the Companies Act, a company can declare dividends only out of distributable profits or accumulated reserves. The books of such SPVs are loaded with high upfront capitalisation of construction costs and subsequent recognition of a concession asset. This asset is depreciated (or amortised in case of intangible assets such as concession right) over the concession period along with the amortization of the earlier capitalised expenditure, leading to significant non-cash expenses in the profit and loss account which continues to hit the Profit and Loss account even when the SPV starts collecting cash. As a result, even when the SPV generates operating cash flows from toll collections, it remains in ‘book losses’ for a portion of the concession life. The consequence is that such SPV is unable to declare dividend distribution to the InvIT despite the availability of cash.

Depreciation on a non-replaceable asset?

Accounting principles require allocation of asset cost over its useful life. This is conceptually sound for assets that are expected to be replaced or reinvested in. A machinery may be required to be replaced once its useful life is over, therefore, it is only prudent to set aside a part of the cost so there is enough cushion when the entity goes to replace the machinery. 

In the case of REITs, this logic holds good. Depreciation reflects the wear and tear of the replaceable asset and the entity has the ability to reinvest/replace the asset over time (i.e. purchase a new rent yielding building in the same SPV). The economic cycle supports the accounting treatment.

For InvIT SPVs especially in the road sector, the asset is not replaced at the end of its life; it is handed back to the concessioning authority. The SPV has no ability to deploy accumulated depreciation (or amortization in case of an intangible asset) towards acquisition of a new asset. Its economic life is co-terminus with the concession period. This creates a disconnect between accounting profits and economic cash flows. Depreciation suppresses book profits without corresponding economic relevance in terms of asset replacement within the SPV.

International comparisons 

Singapore’s Business Trusts

Singapore offers the clearest analogy to and resolution of this problem. The Business Trusts Act 2004 (BTA), administered by the Monetary Authority of Singapore (MAS), created a hybrid structure that combines features of a company (separate legal personality, professional management) with features of a trust (cash-based distributions). The defining advantage of the Singapore Business Trust (BT) is stated explicitly in the legislation and was articulated in the MAS’s explanatory brief for the Business Trusts (Amendment) Bill 2022:

“A key advantage of a BT structure is the ability of a trust to pay dividends to unitholders out of its cash profits. In contrast, a company can only pay dividends out of its accounting profits (i.e. after deducting non-cash expenses such as depreciation). The BT structure is thus particularly suited to businesses with stable growth and high cash flow.”

Singapore listed 15 Business Trusts as of 2026, covering assets including power generation, toll roads, and shipping. For infrastructure BTs, the cash-based distribution right is central to the investment proposition. Critically, the BT does not interpose a company-form SPV between the trust and the infrastructure asset; the trust itself holds the operational assets. This avoids the Section 123-equivalent constraint that would arise if a company-form subsidiary were the operating entity.

The Singapore model, however, is not directly transplantable to the Indian road sector context for the reason explained above ie NHAI’s requirement for a company-form concessionaire. 

The US Master Limited Partnership Model

In the United States, the Master Limited Partnership (MLP) structure, originally developed for oil and gas pipelines and subsequently applied to other infrastructure sectors, avoids the dividend constraint through the partnership form. Partnerships are not subject to corporate dividend restrictions; distributions to limited partners (akin to unitholders in InvITs) are made based on cash available for distribution, a metric that is equivalent to NDCF and adds back non-cash charges including depreciation and amortisation. Interestingly, MLPs typically grant the General Partner (GP is somewhat analogous to the investment manager in an InvIT), a share in the distributable cash flows through Incentive Distribution Rights (IDRs). These rights are structured on a tiered basis, such that as distributions to Limited Partners increase, the GP becomes entitled to a progressively larger share of incremental cash flows. This creates a performance-linked incentive for the GP to enhance distributable cash. At the same time, the GP retains discretion over the quantum of cash to be distributed versus retained.

Possible approaches

In the original consultation process leading to the introduction of InvITs, SEBI did take note of international structures such as the Master Limited Partnerships in the United States, which allow cash-based distributions without being constrained by law dividend rules. However, there was no discussion on the legal form of the SPV and the final regulations settled on a company structure for underlying entities. Had there been flexibility to allow SPVs to be structured as trusts and/or LLPs, the present issue may not have arisen in the first place.

Thin capitalisation

A commonly adopted workaround is to maintain a thinly capitalised SPV, with the bulk of funding structured as loans from the InvIT rather than equity investment. In such cases, distributions are routed primarily through interest payments and loan repayments instead of dividends, a structure widely used in InvIT arrangements. However, this approach may attract limitations under Section 94B of the Income Tax Act, 1961 (section 177 in the 2025 Act), which operates as a Specific Anti-Avoidance Rule (SAAR) on excessive interest deductions. The provision applies where an Indian borrower incurs interest expenditure exceeding ₹1 crore in respect of debt from a non-resident associated enterprise (or even third-party debt backed by such an enterprise). In such cases, the deduction for interest is restricted to 30% of EBITDA or the actual interest payable to associated enterprises, whichever is lower and any excess interest is disallowed. Accordingly, in InvITs where non-residents usually hold the majority of the units, thin capitalisation may lead to disallowance of interest deductions for SPVs.

Allowing Dividend Declaration Based on NDCF

A more targeted solution would be a targeted regulatory relaxation by the Ministry of Corporate Affairs, permitting dividend declaration by InvIT SPVs based on NDCF rather than accounting profits. This would essentially create a sector-specific carve-out from Section 123’s profit test for companies that are 100% subsidiaries of registered InvITs or HoldCos of InvITs. 

Tweaking the legal form of the SPV

One possible approach is to reconsider the legal form of SPVs. Allowing SPVs to be structured as trusts could align the distribution framework more closely with cash flows rather than accounting profits. However, this would require a shift in regulatory and contractual frameworks as SEBI and NHAI both need to be onboarded on this. This solution seems far-fetched as Road assets vesting in a trust is a scenario which NHAI will not be comfortable with.

Conclusion

The principle is clear: regulation must follow the nature of the asset, not force the asset into an ill-fitting form. To mandate distribution without enabling it is, as in the tale of King Canute, to command the tide to rise while forbidding it a shore. An instruction complete in form, but wanting in effect. India’s InvIT framework is, without a doubt, a notable financial innovation, a bridge that has opened public infrastructure to private capital and supported the National Monetisation Pipeline. But the task is not merely to invite capital but to also ensure that the channels through which it flows are kosher. The present framework, in treating REITs and InvITs as parallel structures, overlooks divergence. While REITs rest on perpetuity of assets, InvITs are built on finite-life concessions that steadily deplete. This mismatch, compounded by accounting norms, contractual structures of NHAI and the Companies Act, creates a distribution bottleneck, where cash is generated but cannot be cleanly upstreamed. Industry has found workarounds, principally by way of intercompany loans. But the issue warrants policy attention. We can take guidance from comparative regimes, such as the Singapore Business Trust framework and U.S. MLPs and recognise infrastructure as a cash-flow distribution business and permit distribution mechanisms that reflect this reality. It is therefore imperative that SEBI, MCA, and NHAI act in concert to resolve this misalignment. Only then can InvITs evolve from a promising innovation into a durable pillar of India’s infrastructure architecture.

See our other resources on InvITs:

  1. InvITs and REITs: Regulatory actions for more enabling environment
  2. PPT on InvITs
  3. Roads to Riches: A snapshot of InvITs in India
  4. CG norms for REITs and InvITs aligned with equity-listed entity

RBI’s Draft PPI Norms: Stricter Cash Rules, Simplified Categories, No Cross Border Payments and More

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Simrat Singh and Jeel Ranavat | Finserv@vinodkothari.com

The RBI has proposed an overhaul of the existing prepaid payment instruments (PPI) framework through its draft Master Direction, 2026. The changes aim to, inter-alia, simplify classification, tighten cash usage, restrict cross border payments etc. In this note, we discuss some of the key proposals of the draft master directions.

Simpler classification

Two overarching categories are proposed: 

  1. General Purpose PPI: Comprising Full-KYC PPI and Small PPI (single type, no further sub-types); 
  2. Special Purpose PPI: comprising Gift PPI, Transit PPI, PPI for Foreign Nationals/NRIs (UPI One World) and any other with prior RBI approval. PPI-MTS renamed into Transit PPI

Credit card loading restricted

With a view to curb ‘loan-loaded PPIs’, it is proposed that credit cards can now be used only for Special Purpose PPIs, while General Purpose PPIs are limited to bank account debit, cash or another PPI. This signals a clear intent to ring-fence credit-backed spending to specific use cases. See our resource around loan loaded PPIs here.

Statutory auditor certification for net worth compliance

The draft introduces a procedural clarification by requiring non-bank PPI applicants to submit a certificate from their statutory auditor confirming compliance with the minimum net worth criteria of ₹5 Crores. While the threshold itself remains unchanged, earlier a CA certificate was required; the draft now specifically mandates certification by the statutory auditor in a prescribed format..

Sharp cut in cash usage

Cash usage sees the biggest tightening. Cash loading for Full-KYC PPIs is reduced from ₹50,000 to ₹10,000 per month, pushing higher-value transactions towards bank-linked digital modes. The move appears designed to curb anonymity and improve traceability.

P2P transfers also curtailed

Peer-to-peer transfer (i.e. transfer to another person’s bank account or PPI) limits have been standardised. Instead of differentiated limits based on beneficiary registration, a flat cap of ₹25,000 per month is now proposed.

Monthly usage cap formalised

While earlier regulations relied on outstanding balance caps, the draft introduces an explicit ₹2 lakh monthly debit limit for Full-KYC PPIs. In substance, this aligns with the existing ceiling but adds clarity on usage.

Banks get faster go-live

Banks issuing PPIs will no longer require prior approval if they are already qualified to issue debit cards. A prior intimation to RBI will be sufficient, allowing faster product launches. This acknowledges that regulated banks already meet baseline prudential standards.

This significantly reduces time-to-market and reflects regulatory reliance on the existing prudential and compliance standards applicable to banks. The change is expected to enhance agility, support faster product innovation, and strengthen banks’ participation in the digital payments ecosystem.

Non-bank approvals streamlined

For non-bank issuers, the process is simplified with perpetual authorisation and removal of the explicit in-principle approval stage. The timeline for submission post-regulatory NOC is also relaxed to 45 days from the earlier requirement of 30 days. The draft is silent on the earlier requirement of submitting a System Audit Report (SAR) at the time of authorisation. However, an IS Audit report is proposed to be submitted annually by the issuer.

Core portion interest computation shifts to monthly basis

The draft revises the methodology for computing interest on the core portion by moving from a fortnightly to a monthly calculation framework. Instead of averaging 26 lowest fortnightly balances, issuers will now compute the average of 12 lowest monthly outstanding balances, with the minimum one-year operational requirement continuing. This change appears to be a pragmatic step towards operational simplification, reducing computational intensity while aligning the framework with more conventional monthly cycles. While the earlier explicit restriction on availing loans against such deposits is not reiterated, the fiduciary nature of PPI funds implies that pledging or leveraging customer balances would, in our view, remain impermissible.

Foreign wallet norms liberalised; A push for UPI One World

In contrast to tightening elsewhere, the framework for foreign users is expanded. The UPI One World wallet will now be available to all foreign nationals and NRIs, with a higher ₹5 lakh monthly usage limit.

This step is aimed at making UPI more accessible to international users, especially inbound travellers who often face challenges in using domestic payment systems. By enabling seamless, wallet-based access to UPI, the framework improves convenience and enhances the overall payment experience in India.

Cross-border usage removed

A key change is the blanket removal of cross-border transaction capability for PPIs. Earlier, AD-1 bank issued PPIs could be used for limited overseas transactions. The draft eliminates this entirely, narrowing the scope of PPIs.

Other notable changes

Closed system PPIs continue to remain outside regulation but marketplaces are explicitly excluded from claiming this status. The definition of “merchant” has been broadened, removing the requirement of contractual acceptance. Small PPIs will now expire after 24 months with mandatory balance transfer in case the same has not been converted into Full-KYC PPI, instead of merely restricting further credits.

See our existing resources on PPI:

  1. Checklist on PPI
  2. The future of loan loaded prepaid instruments
  3. The law of prepaid instruments
  4. PPT on Prepaid Instruments
  5. De novo master directions on PPIs
  6. Mobile Wallets

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RBI Proposes TReDS Overhaul in Draft 2026 Directions

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Introduces Credit Guarantee, Mandatory CERSAI Registration among other changes.

RBI has released draft Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026, proposing a comprehensive overhaul of the existing TReDS framework. These draft directions, if notfied, will replace all existing directions and circulars on TReDs.

Below are the 5  key changes proposed:

🔹Introduction of credit guarantee:

Financiers are now permitted to avail credit guarantee cover (via NCGTC) for exposures on TReDS. This is a significant step towards de-risking receivables financing and encouraging wider participation by lenders. Notably, RBI had already expanded the ecosystem in 2023 by permitting insurers as participants to provide credit insurance cover for such exposures.

🔹  Simplified onboarding for MSMEs:

In line with the Governor’s statement, the draft seeks to streamline MSME onboarding by removing the earlier requirement on due diligence of the MSME prior to onboarding.

🔹 Mandatory registration of assignment with CERSAI:

The draft mandates (earlier recommended) registration of assignment of receivables with CERSAI, strengthening legal enforceability and improving transparency of receivables financing transactions.

🔹Annual, monthly and event-based reporting requirements:

Annually (by 30 Sept): submit audited net-worth certificate and IS/Cyber Security Audit report.
Monthly (by 7th): submit TReDS statistics.
Event-based: report any change in Board along with director declaration/undertaking.

🔹Minimum net worth of Rs. 25 Crores for entities setting up a TReDS

The draft requires TReDS entities to maintain a minimum net worth of ₹25 crore (replacing the earlier paid-up capital requirement), duly certified by the statutory auditor. Existing players must meet this requirement by 31 March 2027.

Link to the draft directions: https://lnkd.in/gkuHNJW9

Delegation of powers by Board made prescriptive yet principle based

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Governance Directions of Banks set to be amended effective September 1, 2026

– Vinita Nair and Saloni Khant |  finserv@vinodkothari.com

RBI continues its drive of regulatory reforms for the banking sector, with the recent one being the amendment proposed in the governance directions applicable to commercial banks i.e. Draft Reserve Bank of India (Commercial Banks – Governance) Amendment Directions, 2026 (Draft Directions) relating to policy and non-policy matters placed before the Board for approval, review, information etc. proposed to be made applicable from September 1, 2026. As indicated in RBI’s Statement on Developmental and Regulatory Policies, RBI has undertaken comprehensive review and rationalization of all earlier instructions in an endeavor to enable Boards to utilize its time effectively, and to facilitate a more focused and qualitative engagement on strategy and risk governance.

While, the Draft Directions provide a compilation of matters to be placed before the Board and those that can be delegated to a specific committee or any committee of board/ management, it also provides the principles to be considered by the board while delegating the matters thereby ensuring the adequate oversight of the board  on delegated matters. The amendment would primarily affect the manner in which information is placed before the board of banks, manner and extent of delegation of their powers to committees of board and/or management and reporting requirements for such matters.

The Draft Directions are applicable to both public sector banks and private sector banks.

In this piece, the authors analyse the proposed amendment, impact and indicate the likely actionables for Banks if the amendment is notified as is.

The Role of the Board

The Board of a Bank is expected to majorly focus on overseeing the risk profile of the Bank, monitoring the integrity of its business and control mechanisms, ensuring the expert management, and maximising the interests of its stakeholders. The Board always had the power to delegate certain items to management and board committees, in some cases by way of express provisions in RBI directions, guidelines. But at the same time, it must set and enforce clear lines of responsibility and accountability for itself as well as the senior management.

The Draft Directions draw a clear line between the matters to be dealt by the Board and the matters which can be delegated to committees with only material matters being placed before the Board. Further, a principle based approach is provided for the manner in which information is placed before the Board.

Principle Based Approach for matters to be placed before the Board

The objective of these principles is for the Board to consciously examine the areas where it devotes its valuable time and expertise. The principles require the Board to document express guidelines on the manner in which information is being placed before it.

The board is required to clearly articulate the matters reserved for its approval or to be brought to its notice for information or reporting, based on applicable laws and define the nature, level of detail and frequency of information required from the management. To optimize the time of the Board for real value addition, the chairperson of the Board shall have the primary responsibility of setting the agenda of the meeting.

The matters being placed before it or the Board committees, sub-committees or senior management must be reviewed periodically. This would enable the Board to examine and revoke delegation or further delegate responsibilities wherever required. The review must be detailed enough to include the timelines for circulation of agenda items, adequacy of information captured in the agenda, time allotted for important matters, etc.

The Powers of Delegation

The RBI (Commercial Banks – Governance) Directions, 2025 (existing Directions) provide for delegation of specific items viz. reviews dealing with various performance areas, monitoring of the exposures (both credit and investment) of the bank, review of the adequacy of the risk management process and upgradation thereof, internal control system, ensuring compliance with the statutory / regulatory framework, etc. to a Committee of Board. For ease of reference, the Draft Directions compile as well as draw a clear line between the matters to be dealt by the Board and the matters which can be delegated to committees with only material matters being placed before the Board.

This distinction would enable the Board to focus on its key areas of responsibility – risk and strategy governance and strengthens its powers of oversight over the risk management system, exposures to related entities and conformity with corporate governance standards[1].

Policy Matters

A list of policies which must be placed before the Board for its approval and which may be delegated for review are prescribed in Appendix-I of the Draft Directions. The Board is responsible for approving the policies at the time of framing and only periodical review is to be delegated to the committees. In case of any ‘material amendments’ (to be defined by the Board), the Board’s approval must be sought. Thus, the Board does not lose complete oversight.

Along with a major consolidating exercise, the Draft Directions also indicate policies where delegation is expressly allowed, even where the underlying directions/ guidelines did not expressly provide for the same. Accordingly, the amendments are enabling in nature in certain cases, as illustrated below:

ProvisionsContentsDelegation to
Para 7(3) and 7(4) of RBI (Commercial Banks – Undertaking of Financial Services) Directions, 2025Where the bank intends to function as a Professional Clearing Member in commodity derivatives, policy for-Specification of risk control measures and prudential norms for exposure limits for each trading member;Governing the bank’s exposure to trading members, ensuring consistency with the overall risk appetite and regulatory requirements.Risk Management Committee
Para 7(2) and 7(3) of the RBI (Commercial Banks – Miscellaneous) Directions, 2025Policy on- Courses / certifications required for specialised areas of operationsList of sensitive positions to be covered under mandatory leave requirementsAny Committee to which powers have been delegated by the Board.

Matters other than policy

Matters other than policies which must be placed before the Board for its approval, review or information are given in Appendix-II of Draft Directions. While several matters must be mandatorily taken up by the Board, the Board shall have the discretion to delegate certain matters even where the underlying directions/ guidelines did not expressly provide for the same. Accordingly, the amendments are enabling in nature in certain cases – for e.g. matters relating to risk assessment methodology for RBIA, Annual Audit Plan, analysis of incidents of operational risk failures & their impact to audit committee, matters relating to investment portfolio to risk management committee.

The Draft Directions also provide for discontinuation of about 6 matters at the discretion of the Board. In certain cases, such as ATM transactions including failed transactions and penalties paid, certain details are to be placed before the Board. The details must be forwarded to RBI along with the Board’s observations. The Draft Directions proposes that such review may be discontinued at the discretion of the Board. Accordingly, amendments would be required in the underlying laws as well.  Similarly in case of matters relating to loans to stockbrokers and market makers where the provisions mandate half-yearly review of the aggregate portfolio, its quality and performance by the Board, the board will have to exercise its discretion depending on the extent of exposure.

Proposed Omissions

Certain provisions of the existing Directions proposed to be omitted are as follows:

ParaProvision deals withVKC Remarks
14The Board should focus on the 7 themes of: Business Strategy, Risk, Financial Reports and their integrity, Compliance, Customer Protection, Financial Inclusion, Human ResourcesInstead of specifying the themes, the proposed amendment indicates that the ultimate responsibility for the bank’s performance, conduct and control rests with the Board and that it needs to ensure that sufficient time is dedicated to strategy and risk governance.
16Review of action taken on points arising from earlier meetings till the satisfaction of the boardBroader discretion provided to Banks to decide internal processes and articulate matters requiring its approval or to be brought for reporting or noting of information.
17Placing regulatory communication from RBI and the government along with supplementary information before the Board
18Delegation expressly permitted for: Reviews dealing with various performance areas and only a summary on each of the reviews may be put up to the Board at periodic intervals; Monitoring of the exposures (both credit and investment) of the bank; Review of the adequacy of the risk management process and upgradation thereof; Internal control system; Ensuring compliance with the statutory / regulatory framework, etc.A prescriptive list of permitted delegation has been specified by RBI, refer discussion below.
19Procedural technicalities relating to placing a summary of key observations by directors at the next board meeting and confirmation by directors for their observations, dissents etc. Broader discretion provided to Banks to decide internal processes.

Conclusion

The Draft Directions propose to optimise the time of the Board of Banks to focus on strategic and governance matters instead of operational matters. While this measure aims to boost the productivity of Banks and bring ease of doing business in the short term, once notified, several actionables would arise for Banks. Banks must examine their current decision making structure, at the level of the Board and delegation to committees, to understand how they would align it with the proposed amendments.

[1] Para 15 of the existing directions retained as para 11A of the Draft Directions.

Refer to our other resources:

  1. Representation for issues related to RBI (Commercial Banks – Credit Risk Management)(Amendment) Directions, 2026
  2. RBI Directions on Lending to Related Parties: Frequently Asked Questions
  3. Navigation Roadmap through New Consolidated RBI Directions – Presentation

Indian Securitisation in FY26: Securitised Paper Volumes grow, with originator and asset diversity 

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– Vinod Kothari & Chirag Agarwal | finserv@vinodkothari.com

Volumes of securitisation (which, of course, have always included bilateral assignments or so-called DA transactions) fell by 6% in FY 26, if the origination volume by Reliance group entities in the first half were to be excluded. However, the market has shown more originator diversity, with an increasing share of smaller issuers, including those tasting the market for the first time.

The dip in volumes is because of the larger issuers who were prominently absent or subdued – Shriram Finance as the largest issuer having raised on-balance sheet liquidity, and banking companies. However, the share of gold loans went up sharply, largely due to the sharp increase in gold prices and gold lending, Microfinance companies went more for securitisation, rather than direct assignment transactions.

For anyone studying the Indian securitisation market, it is important to note the following:

  • Reported volumes in India include direct assignments, which, in international parlance, are not “securitisation” (pure bilateral loan sales). However, in India, traditionally, DA has been a close and quick proxy for securitisation, and hence, mostly included. In FY 26, the split of DA/PTC volumes shows PTC transactions having gained in proportion. One rating agency1 reports an increase of PTC volume percentage from 54% to 60%; another one2 shows the increase from 48% to 52%.
  • Indian transactions mostly show LAP transactions as a part of MBS, whereas what the world reports as RMBS is quite small in India. Last year, there was a prominent transaction by LIC Housing Finance, through the NHB-promoted RDCL. There was no RDCL issuance this year. It seems that RMBS volume was either too small to be reportable, or was completely absent.
  • Microfinance sector has been under some stress in the recent past; however, MFIs have increasingly resorted to PTC issuances, with small deal sizes. Some deal sizes are even below 100 crores. This is indicating greater diversity of issuers, and of course, yields and ratings.
  • The market also seems to be showing larger acceptance for lower rated securities i.e., BBB+.

Overall, in a stressful global scenario, securitisation has stood firm. Non financial sector entities have shown increasing willingness to tap the market. Of course, SEBI regulations have to be more enabling.

Below, we give a detailed overview of the securitisation market, including a discussion on the asset classes. 

NBFCs vs Banks

Securitisation volumes have been largely driven by NBFCs, which recorded a 30% year-on-year increase in value. In contrast, originations by banks have declined significantly.

Recent Securitisation Structures in India – A Mix of Tradition and Innovation

Among asset classes, vehicle loans (including commercial vehicles and two-wheelers) accounted for 50% of securitisation volumes (vs 47% in the corresponding period last fiscal). Mortgage-backed loans accounted for about 28% of securitisation volume (vs 37% in the last FY). 

Vehicle loan-backed securitisations dominated the market, both in terms of number of deals and total value, reaffirming the sector’s strong position. This is consistent with the growth trend in vehicle loan originations during FY 25.

In addition to vehicle loans, originators also securitised receivables from a diverse set of underlying asset classes during Q4, including:

  1. Microfinance Loans
  2. Secured Business Loans
  3. Unsecured Business Loans
  4. Home Loans
  5. Unsecured Personal Loans
  6. Gold Loans

The continued diversification in underlying asset classes highlights the evolving maturity of India’s securitisation market and growing investor appetite across segments. The break-up of securitisation volumes across various asset classes have been presented below:

Securitisation of Vehicle Loans

The issuance volume for vehicle loan securitisation during FY26 was approximately ₹1.26 lakh crores. Most of the transactions were structured as single-tranche issuances. However, a few exceptions featured more layered structures comprising senior and equity tranches, or senior, mezzanine, and equity tranches.

In terms of credit ratings, the tranches were rated between A- and AAA. Notably, the senior tranches in the majority of transactions received high investment-grade ratings, typically falling within the AA+ to AAA range. This indicates strong investor confidence and reflects the underlying credit quality of the asset pools, supported by adequate credit enhancement mechanisms. 

Further, replenishing structures were also observed commonly during FY26. These variations indicate growing sophistication in transaction structuring within the vehicle loan securitisation space, aimed at catering to different investor preferences, improving credit protection, and aligning with originator risk appetite. As the market matures, further innovation in structuring and risk mitigation features can be expected.

In terms of credit enhancements, most vehicle loan securitisation transactions during the last quarter of FY26 featured: cash collateral (CC) and overcollateralisation (OC), with the Excess Interest Spread (EIS) serving as the first layer of loss absorption.

Securitisation of Microfinance Loans

During FY26, the MFI sector has seen a revival after a period of stress during FY 25 and FY 24. This has been due to better credit underwriting of lenders, improving performance trends and granular pool characteristics. Further, after a period of stress, the lenders relied on time-tested borrowers rather than exploring new markets leading to higher average ticket size of loans. This has led to a growth in the volumes of securitisation of microfinance loans during FY26. The PTC issuance volume of microfinance institutions increased to 14%  of total PTC issuance in FY26 from 6% of total PTC issuances in FY25. Most of the transactions were structured as a single tranche securitisation. 

Further, most microfinance loan securitisation transactions during the quarter featured credit enhancement through two primary mechanisms: CC and overcollateralisation OC, with the EIS serving as the first layer of loss absorption.

Securitisation of pool of loans backed by Home Loans & LAP

The volume of mortgage backed securitisation has been low both in terms of number as well as in terms of amount of issuance. As compared to FY25, the total MBS issuances dropped to 28% of total issuance from 37%. The transactions featured a common waterfall matrix and had received an overall rating of AAA. 

In terms of credit enhancement, CC and OC has been provided as a credit enhancement with the EIS serving as the first layer of loss absorption. 

Securitisation of Gold Loans

Gold loan securitisation volumes in H2FY26 stood at approximately ₹18,500 crore, significantly higher than the ₹5,000 crore recorded for the whole of FY25.

The jump in gold lending securitisation may be due to increase in gold prices and resultant increase in the value of the collateral. As a result of this valuation spike, average ticket sizes have increased, indicating that as gold valuations rise, consumers are leveraging higher-value loans to meet their financing needs. Another reason for the increased origination may be removal of LTV restriction in case of income generating gold loans.

Securitisation of Unsecured Loans

As per rating rationales published by Care the securitisation volumes of unsecured loans (both personal and business) increased during FY26. Investors in unsecured loan transactions, are preferring the PTC route, due to the support provided by external enhancement. CC and OC have also been provided as a credit enhancement with the EIS serving as the first layer of loss absorption.

Related articles: 

  1. Secure with Securitisation: Global Volumes Expected to Rise in 2025
  2. India securitisation volumes 2024: Has co-lending taken the sheen?
  3. Indian securitisation enters a new phase: Banks originate with a bang
  4. Securitisation: Indian market grows amidst global volume contraction
  1. Crisil report on securitisation volumes: https://www.crisilratings.com/en/home/newsroom/press-releases/2026/04/securitisation-deal-value-peaks-to-rs-2-55-lakh-crore-in-fiscal-2026.html ↩︎
  2. Care report on securitisation volumes
    https://www.careratings.com/uploads/newsfiles/1775801608_FY26%20Retail%20Securitisation%20at%20Rs%202.53%20Trillion%20First%20Dip%20PostPandemic.pdf ↩︎

RBI proposes changes to NBFC-UL identification

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Revised Criteria for Classification

RBI has vide its Press Releases – Reserve Bank of India proposed to review methodology for identification of NBFCs in Upper Layer. The key changes are as follows:

  1. Annual Classification: RBI shall conduct an annual identification process for classification of NBFCs in the Upper Layer.

It may be noted that NBFCs belonging to the banking group are also required to comply with the compliance requirements applicable to Upper Layer NBFCs (except the listing requirement). Our article on compliances to be followed by such NBFCs in the banking group can be seen here. 

  1. Criteria for classification: The current two-step approach (top ten by asset size and parametric scoring) will be replaced by a simple, absolute asset size criterion. The proposed asset size threshold for an NBFC to be classified as UL is ₹1,00,000 crore and above, as per the latest audited balance sheet (this limit is subject to review every 5 years).

A crucial question that arises here is whether the consolidation criteria (multiple NBFCs in the group) be applicable in this case as well to determine the asset size? Though as per prudence, it should apply, to avoid surpassing the regulatory intent, however, the same is specifically not applicable as per the SBR Directions (refer para 21) .

  1. Inclusion of Government-owned NBFCs: Eligible Government-owned NBFCs will now also be considered for inclusion in Upper Layer, based on the revised asset size criteria. Previously, these were placed only in the Base or Middle Layer.

It may be noted that the category of NBFC is not a pre-condition, hence, the list of UL NBFCs would include not just NBFC-ICCs but also HFCs, CICs, deposit taking NBFCs, and not even Govt. NBFCs

  1. Provision for Credit Risk Transfer: All NBFC-UL will be allowed to use State Government guarantees as a credit risk transfer instrument without any specific limit, provided they meet the prescribed conditions.

Implications of NBFC-UL Classification

Once the proposed criteria are implemented and the new list of Upper Layer NBFCs is notified by the RBI, entities classified as NBFC-UL will face certain immediate implications, in addition to specific corporate governance norms. The central point of discussion is how these requirements might impact the growth plans of large NBFCs.

  1. CET 1 requirement: NBFC-UL are required to maintain Common Equity Tier 1 capital of at least 9% of Risk Weighted Assets.

While CET 1 is currently manageable for most existing UL entities, aggressive growth plans could potentially make this a constraining factor for larger NBFCs newly classified as UL.

  1. Leverage Restriction: In addition to CRAR, NBFC-UL shall also be subject to leverage requirements to ensure that their growth is supported by adequate capital, among other factors. Also, NBFC-UL shall be required to hold differential provisioning towards different classes of standard assets.

Leverage ratio would have been an issue if the entity was engaged in derivatives transactions. However, most of the NBFCs in India are not very active in this space. 

  1. Exposure Framework: NBFC-ULs are required to adhere to the Large Exposures Framework. Furthermore, their Board must determine internal exposure limits for important sectors, including exposure to the NBFC sector, in addition to limits on internal exposures to Sensitive Sector Entities (SSEs).

The applicability of the large exposure framework may be a real concern. Large exposure framework looks at economic interdependence as the basis of classification into group risk. There is an absolute limit that the single party exposure cannot be more than 20% of Tier 1 capital (including quarterly audited profits) and 25% in case of a group of counterparties.

  1. Listing Requirement:  NBFC-ULs must be mandatorily listed within three years of being identified and notified as such. Unlisted NBFC-ULs shall be required to make the necessary arrangements for listing within this three-year period.
  1. CICs not accessing public funds: Under the CIC Directions, those CICs that don’t have access to public funds, irrespective of the asset size, are eligible to be classified as an unregistered CIC. Accordingly, such CICs should not be classified in the upper layer even if they breach the asset size criteria. 

Consolidation of RBI Directions Ver 2.0

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Team Finserv | finserv@vinodkothari.com

Following the consolidation action undertaken by the Department of Regulations (DoR) in November 2025, the Department of Supervision has now undertaken a comprehensive exercise to consolidate existing standalone circulars issued by RBI in supervisory domain into function-wise, entity-specific consolidated Directions for easier navigation and application. The supervisory instructions have been organised into distinct Directions for each type of RE on each supervisory function.

  1. Compliance Function– Prescribing the guidelines for compliance risk assessment and appointment of the chief compliance officer.
  2. Concurrent Audit– This is specifically applicable in case of banks and not NBFCs. In case of NBFCs, the Auditor’s Report Directions lays down the disclosures and reporting by auditors of NBFCs
  3. Cybersecurity, Technology: Risk, Resilience and Assurance- Provides comprehensive guidelines on IT governance and policy, information security and cybersecurity, IT operations, information system audit, BCP, disaster recovery and IT services outsourcing.
  4. Digital Payments Security Controls- Provides guidelines for credit-card issuing NBFCs on   governance and security risk mitigation, authentication framework, fraud risk management, reconciliation mechanism, grievance redressal mechanism, web application, mobile application and card payment security controls.
  5. Fraud Risk Management- Lays down the process for identification and classification of fraudulent borrowers and the implementation of early warning signals (EWS)
  6. Internal Audit Function or Risk Based Internal Audit- Provides for harmonised Internal Audit systems and processes to be implemented by larger NBFCs (Deposit Taking and entities having asset size above ₹5000 cr) 
  7. Statutory Audit- Lays down the regulations for appointment of statutory auditors, their eligibility criteria, intimation and reporting to the RBI, etc.
  8. Supervisory Returns- All regulatory filings and submission of returns to the RBI
  9. Miscellaneous- Consolidates the instructions for implementation of CFSS, nomination facility to be provided in case of deposit accounts, fair lending practices for charging of interest and the Prompt Corrective Action Framework. 

A detailed analysis of the drafts for NBFCs has been covered here- 

Proposed DraftExisting CircularsApplicability Key Changes
Reserve Bank of India (Non-Banking Financial Companies – Compliance Function) Directions, 2026Compliance Function and Role of Chief Compliance Officer (CCO) – NBFCs
Streamlining of Internal Compliance monitoring function – leveraging use of technology 		NBFCs, including HFCs, in the ML and UL.No major changes.It has been clarified that in the absence of a new product committee, the CCO shall be required to evaluate all new products before they are launched.
Reserve Bank of India (Non-Banking Financial Companies – Cybersecurity, Technology: Risk, Resilience and Assurance) Directions, 2026 [IT Directions]Master Direction – Information Technology Framework for the NBFC Sector (IT Framework)Reserve Bank of India (Information Technology Governance, Risk, Controls and Assurance Practices) Directions, 2023 (IT Governance)All NBFCsCICs were not required to comply requirements of IT Governance Framework, the draft IT Directions now mandate CICs to comply with the IT baseline technology standardsFor NBFCs with asset size below ₹ 500 cr-Chapter IV of IT Directions:Use of public key infrastructure (PKI) for ensuring  confidentiality of data, access control, data integrity has been made mandatory (earlier recommendatory)Timeline of reporting of cyber incidents to RBI specified as 6 hours (IT Framework did not contain any such timeline)Use of Digital Signature to authenticate electronic records has been made mandatory (earlier recommendatory)For NBFCs with asset size above ₹ 500 cr-Chapter IV of IT Directions, has specified that IT capacity requirements are now to be ensured by ITSC
Reserve Bank of India (Non-Banking Financial Companies – Digital Payment Security Controls) Directions, 2026Master Direction on Digital Payment Security ControlsCard issuing NBFCs There is additional expectation that Risk and Control Self Assessment (RCSA) shall be conducted by vendors as well and such RCSA should be evaluated by the Credit-Card issuing NBFC.Credit-Card issuing NBFCs are required to comply with a number of technical standards for card payment security. Status of compliance with these standards are to be reported to the ITSC for deliberation and appropriate action.
Reserve Bank of India (Non-Banking Financial Companies – Fraud Risk Management) Directions, 2026Master Directions on Fraud Risk Management in Non-Banking Financial Companies (NBFCs) (including Housing Finance Companies)
FAQs on Master Directions on Fraud Risk Management in Regulated Entities (REs), 2024		NBFC-ML, NBFC-UL,NBFC-BL having asset size ₹500 crores and aboveHFCs.No Change. FAQs integrated with the circular. 
Reserve Bank of India (Non-Banking Financial Companies – Internal Audit Function) Directions, 2026Risk-Based Internal Audit (RBIA)All Deposit taking NBFCs and HFCs Non-Deposit taking NBFCs and HFCs with asset size of ₹5,000 crore and aboveNo Change
Reserve Bank of India (Non-Banking Financial Companies – Statutory Audit) Directions, 2026Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)
FAQs on Guidelines for Appointment SCAs/ SAs of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)		NBFCs and HFCs having asset size ₹1000 crores and aboveNo Change. FAQs integrated with the circular. 
Reserve Bank of India (Non-Banking Financial Companies – Supervisory Returns) Directions, 2026Master Direction – Reserve Bank of India (Filing of Supervisory Returns) Directions – 2024
LIST OF RETURNS SUBMITTED TO RBI		All NBFCs (excluding HFCs)Change in name of return DNBS09 from DNBS09-CRILC Weekly– RDB return to DNBS09- Return on Defaulted Borrowers.Quarterly return on Large Exposure Framework to be filed quarterly by all NBFCs in the Upper Layer – The earlier requirement was reporting of 10 largest exposures of the entity as against the proposed requirement of reporting the top 20 largest exposures. Change in nomenclature of returns on fraud reporting:FMR-I to FMRFMR-III to FUAFMR-IV to FMR 4Form A Certificate is now proposed to be filed online instead of filing in hard copy/ via email.It is proposed that hard copy of returns (hand/post/courier) or email submissions would not be accepted (i.e., would not be deemed to have been submitted by the NBFC) unless specifically prescribed.Additional returns to be filed by SPDs specified. 
Reserve Bank of India (Non-Banking Financial Companies – Miscellaneous) Supervisory Directions, 2026Implementation of ‘Core Financial Services Solution’ by Non-Banking Financial Companies (NBFCs)Fair Practices Code for Lenders – Charging of InterestCoverage of customers under the nomination facilityPrompt Corrective Action (PCA) Framework for Non-Banking Financial Companies (NBFCs)Chapter III – All NBFCs including HFCs and MFIsChapter IV – Deposit Taking NBFCs (excl. HFCs)Chapter V- Deposit taking, Non-Depositaking, in Middle, Upper and Top Layers including CICs but excluding NBFCs not accepting/ intending to accept public funds.The phased manner timelines for implementation of CFSS has been removed since the circular is now effective 
Reserve Bank of India (Non-Banking Financial Companies – Auditor’s Report) Directions, 2026Master Direction – Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016

Provisions related to DNBS-10 (SAC) in Master Direction – Reserve Bank of India (Filing of Supervisory Returns) Directions – 2024 		Applicable to every auditor of an NBFCClarified that the auditor is now obligated to report to the RBI instances of non-compliance with all applicable extant directions issued by RBI.
Other than the above, no major change except updation of references.