What was announced?
The Reserve Bank of India (RBI) released a draft framework, "Reserve Bank of India (Non-Fund Based Credit Facilities) Directions, 2025", including guarantees, letters of credit, and performance guarantees.
When?
This draft was issued in April 2025 and is currently open for public comments.
Applicability
These directions apply to all Regulated Entities (REs) including:
- Commercial Banks (including Regional Rural Banks and Local Area Banks)
- Urban/State/Central Co-operative Banks
- All India Financial Institutions (AIFIs)
- All NBFCs and Housing Finance Companies (HFCs)
Impact on Banks
Unified Framework
Consolidates and standardizes rules for issuing NFB credit across all REs.
Stricter Credit Appraisal
NFB facilities to undergo credit appraisal with the same rigor as fund-based credit.
Policy Prerequisite
Banks must include specific provisions for NFB facilities in their credit policies.
Eligibility Rule
NFB facilities can only be issued to customers with existing fund/deposit relationships (except for derivative exposures).
Guarantees must be
- Irrevocable (cannot be unilaterally canceled)
- Unconditional (no payout delay clauses) Incontrovertible (must pay when invoked)
Risk Controls
Requires internal ceilings and controls for the issuance of unsecured guarantees.
Reporting & Disclosures
Updated disclosure norms for transparency and regulatory reporting.
All regulatory changes arising from this announcement will be addressed as part of the OneSumX Regulatory Update Services (RUS). Learn how to be prepared for upcoming regulatory changes by visiting OneSumX for Regulatory Reporting.
