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Lending to your own: RBI Amendment Directions on Loans to Related Parties

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-Team Finserv | finserv@vinodkothari.com

On January 5, 2026, the RBI issued the Amendment Directions on Lending to Related Parties by Regulated Entities. Pursuant to this, changes were introduced to Reserve Bank of India (Non-Banking Financial Companies – Credit Risk Management) – Amendment Directions, 2026 (CRM Amendment Directions) and Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Directions, Amendment Directions, 2026. Previously, Draft Directions were also issued on the subject. Our write-up on the draft directions can be accessed here.

Highlights

Applicability and Effective Date

The amendments under CRM Directions shall apply to all NBFCs, including Housing Finance Companies (HFCs) with regard to lending by an NBFC to its ‘related party’ and any contract or arrangement entered into by an NBFC with a ‘related party’. However, Type 1 NBFCs and Core Investment Companies shall not be covered under the applicability. 

These amendments shall come into force on 1 April 2026. NBFCs may, however, choose to implement the amendments in their entirety from an earlier date.

In addition to complying with the provisions of the Amendment Directions, listed NBFCs shall continue to adhere to the applicable requirements of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time.

Grandfathering of existing arrangements: Existing RPTs that are not compliant with these amendments may continue until their original maturity. However, such loans, contracts, or credit limits shall not be renewed, reviewed, or extended upon expiry, even where the original agreement provides for renewal or review.

Any enhancement of limits sanctioned prior to 1st April 2026 shall be permitted only if they are fully compliant with these amendments.

Relevant Definitions 

Related Party

RPs under Amendment DirectionsWhether covered in the Present Regulations
(A) Related Persons: These can be non-corporate
a promoter, or a director, or a KMP of the NBFC or relatives of the said (natural) personAll other persons except the promoter was covered
Person holding 5% equity or 5% voting rights, singly or jointly, or relatives of the said (natural) personNo
Person having the power to nominate a director through agreement, or relatives of the said (natural) personNo
Person exercising control, either singly or jointly, or relatives of the said (natural) personYes
(B) Related Parties: These can be any person other than individual/HUF, and cover Entities where (A) Covered Partially
is a partner, manager, KMP, director or a promoterPromoter not covered
hold/s 10% of PUSCHolds lower of (i)10% of PUSC and (ii)₹5 crore in PUSC
has single or joint control with another personYes
controls more than 20% of voting rightsNo
has power to nominate director on the BoardNo
are such on the advice  direction, or instruction of which the entities are accustomed to actNo
is a guarantor/suretyYes
is a trustee or an author or a beneficiary (where entity is a private trust)No
Entities which are related to (A) as subsidiary, parent/holding company, associate or joint ventureYes

The definition of “Related Party” remains unchanged from that provided under the Draft Directions. 

Further, a clarification have been added where an entity in which a related person has the power to nominate a director solely pursuant to a lending or financing arrangement shall not be regarded as a related party.

Related Person

Under the Draft directions, the definition of a “related person” included group entities. However, pursuant to the Amendment Directions, group entities have been expressly excluded from the scope of “related person.” The provisions are specific for lending to directors, KMPs and their related parties. In the case of lending to entities such as subsidiaries and associates, the NBFC must adhere to the concentration norms as prescribed under the CRM Directions. 

Specified Employees

The definition of “Senior Officer” as provided under the erstwhile regulations (Para 4(1)(vii) of the Credit Risk Management Directions) has been omitted and, in its place, the concept of “Specified Employees” has been introduced. “Specified Employees” has been defined to mean all employees of an NBFC who are positioned up to two levels below the Board, along with any other employee specifically designated as such under the NBFC’s internal policy.

Under the erstwhile regulations, the term “Senior Officer” was given the same meaning as defined under Section 178 of the Companies Act, 2013. Thus, the terms Senior Officer included the following:

  1. Members of the core management team,
  2. All members of management who are one level below the Executive Directors,
  3. Functional heads

Practically, this change implies that one additional hierarchical level would now need to be designated as “Specified Employees”. Further, the specific inclusions that earlier applied under the Companies Act and the LODR Regulations i.e., functional heads under the Companies Act and CS and CFO under the LODR will no longer be automatically covered, unless they fall within two levels below the Board or are specifically designated as such under the NBFC’s internal policy.

Meaning of “Lending”

‘Lending’ in the context of related party transactions would include funded as well as non-fund-based credit facilities to related parties. It may further be noted that investments in debt instruments of related parties are specifically included within the ambit of lending. Accordingly, the scope is not just restricted to loans and advances but includes all fund based and non-fund based exposures as well as investment exposures. 

Principles to be followed while lending to a related party

While lending to related parties, the following principles and provisions are to be followed by NBFCs:

  1. Credit Policy

The credit policy of the NBFC must contain specific provisions on lending to RPs. Mandatory contents of such policy will include:

  1. Definition of RPs and Specified Employees
  2. Safeguards to address the risks emanating from lending to related parties
  3. Provisions relating to lending to ‘specified officers’ of the NBFC and their relatives
  4. Provisions related to a suitable whistleblower mechanism for employees to raise concerns over irregular and unethical loans to RPs. Any kind of quid pro quo arrangements should also be prohibited.
  5. Materiality Thresholds for sanctioning of the loans
  6. Interested parties to recuse themselves
  7. Limits for lending to RPs, including sub-limits for lending to a single related party and a group of related parties
  8. Monitoring mechanism for such loans to RPs. This would include the designation of a specified authority for monitoring as well as reporting to the Board/Board committee. Further, procedure in case of deviation from the policy must also be prescribed. 

Earlier, the policy requirement was specifically applicable in case of base layer NBFCs, but now the same has been made applicable for all NBFCs. 

  1. Board approved limits for lending to RPs

The CRM Amendment Directions also mandate prescribing board-approved limits for lending to RPs. Further, sub-limits will also have to be prescribed for lending to a single RP and a group of RPs. Here, a question may arise on what basis will the NBFC prescribe such limits? Such limits may be prescribed after considering the ticket size of the loans generally offered by the Company, to ensure the loans to RPs are aligned with the loan products for general customers. The limit may be specified as a percentage of the NOF of the NBFC, similar to the credit concentration limits. 

  1. Materiality Thresholds

NBFCs may extend credit facilities to related parties in accordance with their Board-approved credit policy. Any such lending must be within the board-approved limit prescribed for lending to RPs (including a single RP and a group of RPs). 

Further, under the Amendment Directions (Para 13G of the CRM Amendment Directions), RBI has now clearly laid down materiality thresholds for such lending to related parties, including those to directors, senior officers, and their relatives. Lending above the prescribed materiality threshold should be sanctioned by the Board/Board Committee of the NBFC. (other than the Audit Committee).

It may be noted that earlier, for middle and upper layer NBFCs, any loans aggregating to ₹ 5 Crore and above were to be sanctioned by the Board/Board Committee. The materiality thresholds prescribed under the Amendment Directions are based on the layer of the NBFC, as follows:

Category of NBFCsMateriality Threshold
Upper Layer and Top Layer₹10 crore
Middle Layer₹5 crore
Base Layer₹1 crore
Layer of the NBFC shall be based on the last audited balance sheet.For loans, materiality threshold shall apply at individual transaction level

Can the power to sanction loans be delegated to the Audit Committee?

The CRM Amendment Directions have defined the Committee on lending to related parties which will mean a committee of the Board of the NBFC entrusted with sanctioning of loans to related parties. NBFCs may also identify any existing Committee, other than the Audit Committee, for this purpose.

Further, para 13I provides that,

However, a NBFC at its discretion, may delegate the above powers of lending beyond the materiality threshold to a Committee of the Board (hereafter called Committee) other than the Audit Committee of the Board

Accordingly, on a reading of the above, it seems that the power to sanction loans cannot be provided to the Audit Committee of the Board. 

  1. Monitoring and Reporting Mechanism
  1. NBFC shall maintain and periodically update the list of all related persons, related parties, and loans sanctioned to them. This will be in addition to the list of related parties of the NBFC, which comes from the Companies Act, 2013, LODR and Accounting Standards.
  2. The list shall be reviewed at regular intervals to ensure accuracy and compliance.
  3. Credit facilities sanctioned to specified employees and their relatives shall be reported to the Board annually.
  4. Any deviation from the lending policy on related parties, along with reasons, shall be reported to the Audit Committee or to the Board where no Audit Committee exists.
  5. Products/structures circumventing these Directions (reciprocal lending, quid pro quo) shall be treated as related party lending.

5. Quid Pro Quo Arrangements

The CRM amendment directions also provide that any arrangements which aim at circumventing the Amendment Directions will be treated as lending to RPs. Accordingly, any such arrangements involving reciprocal lending to related parties shall be subject to all the provisions of this direction. 

  1. Refrain from participation

Para 13J requires that Directors, KMPs and specified employees must recuse themselves from any deliberations or decision-making on loan proposals, contracts or arrangements that involve themselves or their related parties. This obligation also applies to all subsequent decisions involving material changes to such loans, including one-time settlements, write-offs, waivers, enforcement of security and implementation of resolution plans, to ensure independence and avoid conflicts of interest.

Financial Statements Disclosures

Details of exposure to related parties as per these Directions shall be disclosed in the Notes To Accounts pursuant to para 21(9A) of the Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Directions, 2025 in the following format:

(Amt in ₹ Crore)
Sr. NoParticulars Previous YearCurrent Year
Loans to Related Parties
1Aggregate value of loans sanctioned to related parties during the year
2Aggregate value of outstanding loans to related parties as on 31st March
3Aggregate value of outstanding loans to related parties as a proportion of total credit exposure as on 31st March
4Aggregate value of outstanding loans to related parties which are categorized as:
(i) Special Mention Accounts as on 31st March
(ii) Non-Performing Assets as on 31st March
5Amount of provisions held in respect of loans to related parties as on 31st March
Contracts and Arrangements involving Related Parties
6Aggregate value of contracts and arrangements awarded to related parties during the year
7Aggregate value of outstanding contracts and arrangements involving related parties as on 31st March

Comparison at a Glance

ParametersExisting GuidelinesAmendment Directions
ApplicabilityNBFC-BL- only policy requirement was prescribedNBFC-ML and above – threshold, approval and reporting was applicableNBFCs in all layers, except Type 1 and CICs
Materiality Threshold/ Threshold for seeking board approvalNBFCs-BL- As per the PolicyNBFCs-ML- Rs. 5 croreNBFCs-UL- Rs. 5 croreNBFCs-BL- Rs. 1 croreNBFCs-ML- Rs. 5 croreNBFCs-UL- Rs. 10 crore. Lending beyond the MT requires board or board committee approval (other than AC).
Board approved limits for lending to RPsNo such limit was required to be prescribedPolicy shall specify aggregate limits for loans towards related parties. Within this aggregate limit, there shall be sub-limits for loans to a single relatedparty and a group of related parties.Lending beyond the board approved limit, requires ratification by the Board/AC.
MonitoringLoans and Advances to Directors less than ₹5 crores shall be reported to the Board.
Further, all loans and advances to senior officers shall be reported to the Board.		Para 13K: Maintain and periodically update list of related persons, related parties, and loans to them.
Para 13L: Annually report credit facilities to specified employees and relatives to the Board.
Para 13M: Quarterly or shorter internal audit reviews on adherence to related party guidelines.
Para 13N: Report deviations and reasons to the Audit Committee or Board.
Para 13O: Products/structures circumventing Directions (reciprocal lending, quid pro quo) shall be treated as related party lending.
Policy RequirementOnly for NBFC-BL. NBFCs were required to prescribe a threshold beyond which the loans shall be required to be reported to the BoardApplicable for all NBFCs.  
Recusal by interested partiesDirectors who are directly or indirectly concerned or interested in any proposal should disclose the nature of their interest to the Board when any such proposal is discussedInterested parties, including specified employees to recuse themselves
Disclosure under FSRelated Party Disclosure were specified as per format prescribed under Para 21(9) of Financial Statement Disclosures DirectionsIn addition to the earlier requirement, another format has been prescribed under Para 21(9A) with respect to details of exposures to related parties
Power to sanction loans to RPsFor NBFCs-BL: Only reporting is required; no board approval
For NBFCs-ML and above: Board approval required for loans above the threshold.		For all NBFCs:Loans above materiality threshold shall be sanctioned by Board or delegated Committee (not Audit Committee)
Loans below the threshold shall be sanctioned by appropriate authority as defined under the Policy.

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SEBI says SWAGAT to investors

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– Team Corplaw | corplaw@vinodkothari.com

– Approves major proposals easing institutional investments in IPOs, minimum offer size for larger entities, AIF entry, increased threshold for related party transaction approvals etc.

Relaxed norms for Related Party Transactions 

  • Introduction of scale-based threshold for materiality of RPTs for shareholders’ approvals based on annual consolidated turnover of the listed entity
Annual Consolidated Turnover of listed entity (in Crores)Approved threshold (as a % of consolidated turnover)
< Rs.20,00010%
20,001 – 40,0002,000 Crs + 5% above Rs. 20,000 Crs
> 40,0003,000 Crs + 2.5% above Rs. 40,000 Crs
  • Revised thresholds for significant RPTs of subsidiaries
    • 10% of standalone t/o or material RPT limit, whichever is lower.
  • Simpler disclosure to be prescribed by SEBI for RPTs that does not exceed 1% of annual consolidated turnover of the listed entity or Rs. 10 Crore, whichever is lower. ISN disclosures will not apply.
  • ‘Retail purchases’ exclusions extended to relatives of directors and KMPs, subject to existing conditions 
  •  Inclusion of validity of shareholders’ approval as prescribed in SEBI circular dated 30th March 2022 and 8th April, 2022 
  • Rationale (See Consultation Paper)

Relaxation in thresholds for Minimum Public Offer (MPO) and timelines for compliance Minimum Public Shareholding (MPS) for large issuers (issue size of 50,000 Cr and above)

  • Reduction in MPO requirements for companies with higher market capitalisation 
  • Relaxed timelines for complying with MPS
  • Post listing, the stock exchanges shall continue to monitor these issuers through their surveillance mechanism and related measures to ensure orderly functioning of trading in shares 
  • Applicable to both entities proposed to be listed and existing listed entities that are yet to comply with MPS requirements 
  • Following changes recommended in Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957: 
Post-issue market capitalisation (MCap) MPO requirements Timeline to meet MPS requirements (25%)
Existing provisions Post amendmentsExisting provisions Post amendments
≤ 1,600 Cr25%NA
1,600 Cr < MCap ≤ 4,000 Cr400 Crs  Within 3 years from listing
4,000 Cr < MCap ≤ 50,000 Cr10%Within 3 years from listing
50,000 Cr < MCap ≤ 1,00,000 Cr10%1,000 Cr and at least 8% of post issue  capitalWithin 3 years from listingWithin 5 years from listing
1,00,000 Cr < MCap ≤ 5,00,000 Cr5000 Cr and  atleast 5% of post issue  capital 6, 250 Cr and 2.75% of post issue  capital10% – within 2 years 25% – within 5 yearsIf MPS on the date of listing <15%, then15% – within 5 yrs25% – within 10 yrs
If MPS >15% on the date of listing, 25% within 5 yrs
MCap > 5,00,000 Cr15,000 Cr and 1%of post issue  capital, subject to minimum dilution of 2.5%If MPS on the date of listing <15%, then15% – within 5 yrs25% – within 10 yrs
If MPS on the date of listing  >15%, 25% within 5 yrs
  • Rationale (see Consultation Paper):
    • Mandatory equity dilution for meeting MPS requirement may lead to an oversupply of shares in case of large issues; 
    • Dilution may impact the share prices despite strong company fundamentals. 

Broaden participation of institutional investors in IPO through rejig in the anchor investors allocation

  • Following changes recommended in Schedule XIII of ICDR Regulations.
    • Merge Cat I and II of Anchor Investor Allocation to a single category of upto 250 crores. Minimum 5 and maximum 15 investors subject to a minimum allotment of ₹5 crore per investor.
    • Increasing   the   number   of   permissible  Anchor Investor allottees for allocation above 250 crore in the discretionary allotment –  for every additional ₹250 crore or part thereof, an additional 15 investors (instead of 10 as per erstwhile norms) may be permitted, subject to a minimum allotment of ₹5 crore per investor. 
    • Life insurance companies and pension funds included in the reserved category along with domestic MF; proportion increased from 1/3rd (33.33%) to 40%
      • 33% for domestic MFs
      • 7% for life insurance companies and pension funds
        • In case of undersubscription, the unsubscribed part will be available for allocation to domestic MF.
  • Rationale (See Consultation Paper)
    • Increase in permitted investors:
      • To ease participation  for  large  FPIs  operating  multiple  funds with  distinct  PANs,  which  currently  face  allocation  limits  due  to  line  caps
      • Given the recent deal size, most  issuances  fall  within  the  threshold  of Cat II  or  higher, limiting the relevance of Cat 1, therefore merge Cat 1 and Cat II
    • Including life insurance companies and pension funds:
      • Growing interest in IPOs, the amendment will ensure participation and diversify long term investor base.

Clarifications in relation to manner of sending annual reports for entities having listed non-convertible securities [Reg 58 of LODR]

  • For NCS holders whose email IDs are not registered
    • A letter containing a web link and optionally a static QR code to access the annual report to be sent
      • Instead of sending hard copy of salient features of the documents as per sec 136 of the Act 
      • Aligned with Reg 36(1) (b) of LODR as applicable to equity listed cos
      • Currently, temporary relaxation was given by SEBI from sending of hard copy of documents, provided a web-link  to  the  statement  containing  the  salient  features  of  all  the documents is advertised by the NCS listed entity 
  • Timeline for sending the annual report to NCS holders, stock exchange and debenture trustee
    • To be specified based on the law under which such NCS-listed entity is constituted 
    • For e.g. – Section 136 of the Companies Act specifies a time period of at least 21 days before the AGM.

Light touch regulations for AIFs that are exclusively for Accredited Investors and Large Value Funds

  • Introduction of new category of AIFs having only Accredited Investors 
  • Reduction of minimum investment requirements for Large Value Funds (LVFs) from Rs. 70 crores to Rs. 25 crores per investor 
  • Lighter regulatory framework for AIs – only/ LVFs 
  • Existing eligible AIFs may also opt for AI only/ LVF classification with associated benefits
  • Rationale: see Consultation Paper 

Read detailed article: Proposed Exclusivity Club: Light-touch regulations for AIFs with accredited investors

Facilitating investments in REITs and InVITs

  • Enhanced participation of Mutual Funds through re-classification of investment in REITs as ‘equity’ investments, InVITs to continue ‘hybrid’ classification
    • Results in REITs becoming eligible for limits relating to equity and equity indices 
    • Entire limits earlier available to REITs and InVITs taken together now becomes available to InVITs only
  • Rationale (see Consultation Paper)
    • In view of the characteristics of REIT & InVITts and to align with global practice
  • Expanding the scope of ‘Strategic Investor” & aligning with QIBs under ICDR
    • Extant Regulations cover: NBFC-IFCs, SCB, a multilateral and bilateral development financial institution, NBFC-ML & UL, FPIs, Insurance Cos. and MFs.
    • Scope amended to include: QIBs, Provident & Pension funds (Min Corpus > 25Cr), AIFs, State Industrial Development Corporation, family trust (NW > 500 Cr) and intermediaries registered with SEBI (NW > 500 Cr) and NBFCs – ML, UL & TL
    • Relevance of Strategic Investors: 
      • Invests a min 5% of the issue size of REITs or INVITs subject to a maximum of 25%. Investments are locked in for a period of 180 days from listing
      • Such subscription is documented before the issue and disclosed in offer documents
    • Rationale: see Consultation Paper
      • to attract capital from more investors under the Strategic Investor category
      • to instil confidence in the public issue

SWAGAT-FI for FPIs: relaxing eligibility norms, registration and compliance requirements

  • Registration of retail schemes in IFSCs as FPIs alongside AIFs in IFSC
    • Both for retail schemes and AIFs, the sponsor / manager should be resident Indian
  • Alignment of contribution limit by resident indian non-individual sponsors with IFSCA Regs
    • Sponsor contributions shall now be subject to a maximum of 10% of corpus of the Fund (or AUM, in case of retail schemes)
  • Overseas MFs registering as FPIs may include Indian MFs as constituents
    • SEBI circular Nov 4, 2024 permitted Indian MFs to invest in overseas MFs/UTs that have exposure to Indian securities, subject to specified conditions
  • SWAGAT for objectively identified and verifiably low-risk FIs and FVCIs
    • Introduction of SWAGAT-FI status for eligible foreign investors
      • Easier investment assess
      • Unified registration process across multiple investment routes
      • Minimize repeated compliance requirements and documentation
    • Eligible entities (applicable to both initial registration and existing FPIs):
      • Govt and Govt related investors: central banks, SWFs, international / multilateral organizations / agencies and entities controlled or 75% owned (directly or indirectly) thereby
      • Public Retail Funds (PRFs) regulated in home jurisdiction with diversified investors and investments, managed independently: MFs and UTs (open to retail investors, operating as blind pools with diversified investments), insurance companies (investing proprietary funds without segregated portfolios), PFs
    • Relaxation for SWAGAT-FIs
    • Option to use a single demat account for holding all securities acquired as FPI, FVCI, or foreign investor units, with systems in place to ensure proper tagging and identification across channels

India Market Access – dedicated platform for current and prospective FPIs

To tackle the problem of global investors in accessing Indian laws and regulatory procedures across various platforms, citing the absence of a centralized and comprehensive legal repository.

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Relaxed Party Time?: RPT regime gets lot softer

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12 hours Certificate Course on Nuts and Bolts of Related Party Transactions

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Register here: https://docs.google.com/forms/d/e/1FAIpQLSeC4uYjZyCvMGMebgW2WOSfxDLryEu50LhbKCpvcIPro28JjQ/viewform

Workshop on Related Party Transactions.pptxDownload

Repetitive Overhaul: RPT regime to get softer

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FAQs on Standards for minimum information to be disclosed for RPT approval

FAQs on Standards for minimum information to be disclosed for RPT approval

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Register for our Certificate Course on RPTs, see details here – https://vinodkothari.com/2025/08/12-hours-certificate-course-on-nuts-and-bolts-of-related-party-transactions/

FAQs on Revised RPT ISN_05.09.2025Download

Our brief note on the Industry Standards can be read here.

Our other resources on RPTs can be accessed here.

Presentation on Industry Standards Note on disclosure for RPTs

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Industry Standards Note for RPT disclosures_20022025 (2)Download

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Webinar on Industry Standards Note on disclosure for RPTs

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Register here: https://forms.gle/t2srMSabnyVfBPyZA

Brochure -webinar on ISF disclosure for RPTs.pptxDownload

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FAQs on Standards for minimum information to be disclosed for RPT approval

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– Team Corplaw | corplaw@vinodkothari.com

In view of revision in the Industry Standards Note, we have revised our FAQs on the subject. Kindly read the revised FAQs on the link here: https://vinodkothari.com/2025/07/faqs-on-standards-for-minimum-information-to-be-disclosed-for-rpt-approval/

FAQs on ISF Standards on RPT disclosures.docxDownload

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Information Explosion for Related Party Transactions: Need of the hour or too much to handle?

Related Party Transactions- Resource Centre

LODR Resource Centre

Information Explosion for Related Party Transactions: Need of the hour or too much to handle?

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– Team Corplaw | corplaw@vinodkothari.com

  • Revised regulatory regime on RPT disclosures before Audit Committee & Shareholders
  • Applicability 
    • For RPTs entered into on and after 1st April, 2025 –
      • Will apply to RPTs proposed to be taken for Omnibus Approval (‘OA’) for FY 25-26
      • What if OA already obtained FY 25-26 as on the date of this circular?
      • Whether a revised approval with the additional disclosures is required?
        • Whether 1st April, 2025 refers to the date of the approval granted by the AC/ shareholders, or it pertains to the date of entering into the transaction, is not clear from the language of the Standard. In fact, the Standard uses the following language: “These Standards shall be applicable in respect of RPTs entered into by the Listed Entity on or after 01st April, 2025”, from which one may infer that the reference is to the date of entering into the transaction. 
        • In our view, the proper interpretation of the applicability clause is that it pertains to the RPTs entered into on or after 1st April 2025, for which approval is being sought from either the AC or the shareholders on or after 1st April 2025. Relating the applicability date to the date of entering into the RPT will amount to rendering existing approvals redundant.
  • Classification of RPTs 
    • MRPTs – Material RPTs under Reg 23(1) & (1A) of LODR 
    • ORPTs – Other non-material RPTs exceeding materiality thresholds under Reg 30(4) of LODR
      • Whether aggregation of all transactions or only similar nature of transactions for determination of ORPTs? 
        • All transactions (individually or taken together with previous transactions during a financial year) to be aggregated for determination of ORPTs, regardless of the nature of transactions.
    • RRPTs – Residual RPTs not falling under above 
  • Classification of Disclosures 
    • Comprehensive Disclosures
      • All disclosures specified  in Para 4 of the Circular.
    • Limited Disclosures
      • All disclosures specified  in Para 4 of the Circular except certain line items.
    • Minimum Disclosures
      • All disclosures as specified in Rows A(1), A(2), A(4), A(5) and B(1) of Para 4 of these Standards, as applicable to relevant RPT

(as per the flow chart below)

  • Information to be provided 
    • Management to provide information against each line-item
      • ~90 line-items on which disclosures required
        • However, the same is to be filled basis the nature and category of RPT
        • Indicate NA, where field is not applicable
        • Indicate NIL, where details are not provided 
    • Certificate to be provided 
      • From
        • CEO/ CFO/ any KMP and 
        • Every promoter director of the listed company
          • Where director does not provide, disclose to AC & S/h (in case of material RPTs)
        • Placed before the AC 
      • To the effect that
        • RPTs to be entered into are not prejudicial to the interest of public shareholders 
        • Terms and conditions of RPT are not unfavourable to listed entity 
        • Compared to terms and conditions, had similar transaction been entered into with unrelated party 
  • Additional role of AC
    • Comments to be provided against applicable line-items only
      • To be recorded in minutes 
      • For MRPTs, disclose before shareholders in explanatory statement
      • Does not restrict the AC to give comments on other line items 
    • May approve redaction of commercial secrets and such other information that would affect competitive position of listed entity from disclosures to shareholders
    • Statement of assessment that relevant disclosures for decision-making were placed before them, and they have determined that the promoter(s) will not benefit from the RPT at the expense of public shareholders.
    • Disclose to shareholders that the certificate provided by KMP and promoter directors has been reviewed 
    • If comparable bids not invited –  state justification 
    • If comparable bids not available – specify basis for recommending that terms are beneficial to shareholders 

In view of the significance of the topic, we are collating our comprehensive FAQs on the same. Access the same below.

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FAQs on Standards for minimum information to be disclosed for RPT approval

Related Party Transactions- Resource Centre

LODR Resource Centre

Read more on RPT here.

SEBI’s Plethora of Proposals

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– Sourish Kundu, Executive | corplaw@vinodkothari.com

RECENT SEBI CPs.pptx (1)Download

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Subsidiaries to refer LODR definition of “related party” – going too far with relationships?

SEBI approves stricter norms for RPTs

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CS Vinita Nair | Vinod Kothari & Company

September 29, 2021

SEBI in its Board meeting held on September 28, 2021 approved the amendments in RPT framework that were proposed by the Working Group[1] (‘WG’) in January, 2020. The notification amending SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) is awaited. Certain amendments to come into force from April 1, 2023 and remaining from April 1, 2022. This write up discusses the key amendments approved by SEBI in the Board meeting held on September 28, 2021[2].

In view of the recent amendment made in Listing Regulations w.e.f. September 7, 2021 the framework for Related Party Transactions (‘RPTs’) is also applicable to a High Value Debt Listed Entity (‘HVDLE’)[3].

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