The Reserve Bank of India (RBI) on November 28, 2025, released the Reserve Bank of India (Small Finance Banks – Classification, Valuation and Operation of Investment Portfolio) Directions, 2025 for public comments. Issued under Section 35A of the Banking Regulation Act, 1949, these directions aim to standardize the framework for investment classification, valuation, and risk management applicable to all Small Finance Banks (SFBs).
The provides a comprehensive structure covering governance, investment policy formulation, classification of investments into categories such as Held to Maturity (HTM), Available for Sale (AFS), and Fair Value through Profit and Loss (FVTPL), and guidelines for reclassification, valuation, and income recognition. It also prescribes the role of the Board, including approval of investment policy, formation of an investment committee, monitoring of risks, and periodic review of investment portfolios.
Additionally, the directions emphasize robust internal credit assessment, prudential exposure limits, and risk management systems to ensure sound investment practices. They also mandate that all investments be held in dematerialized form, and all transactions comply with regulatory settlement procedures. Once finalized, these directions will promote transparency, consistency, and prudent risk management in the investment operations of SFBs.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/193 DOR.MRG.REC.No.112/ 00-00-001/2025-26]
