The Reserve Bank of India (RBI) on November 28, 2025, released the Reserve Bank of India (Small Finance Banks – Concentration Risk Management) Directions, 2025, seeking public comments. The aims to strengthen the prudential framework for managing concentration risk among Small Finance Banks (SFBs) by prescribing limits on exposures to single borrowers, groups, and sectors. It outlines comprehensive definitions for exposure, aggregate sanctioned credit limits (ASCL), and credit equivalents for derivatives, establishing a foundation for consistent and transparent measurement of credit and investment exposures across the banking system.
The Directions emphasize the Board’s oversight role, requiring formulation of policies on intra-group exposures, sectoral ceilings, and capital market limits, as well as annual reviews of exposure management. To address systemic risk from large borrowers, the introduces the concept of “Specified Borrowers” (those with ASCL above ₹10,000 crore) and “Normally Permitted Lending Limits” (NPLL), capping additional bank lending to such entities. Borrowings beyond NPLL would attract higher provisioning (3%) and additional risk weights (75%), promoting market-based funding diversification and reducing overdependence on the banking system.
Further, the prescribes prudential norms on intra-group exposures, inter-bank liabilities, and country risk, ensuring that SFBs maintain balanced asset-liability profiles and avoid excessive risk concentration. By integrating exposure norms with capital adequacy and stress-testing standards, these Directions seek to foster resilience, governance discipline, and systemic stability within the SFB segment.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/189 DOR.CRE.REC.108/07-03-002/2025-26]
