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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Reserve Bank of India (Non-Fund Based Credit Facilities) Directions, 2025

06-Aug-2025 | RBI/DOR/2025-26/140 DOR.STR.REC.45/13.07.010/2025-26

Reserve Bank of India (RBI) has issued Reserve Bank of India (Non-Fund Based Credit Facilities) Directions, 2025 with effect from 01st April 2026. Key Highlights: 1. Applicability - a. The directions aim to regulate non-fund based (NFB) credit facilities like guarantees, letters of credit, and co-acceptances to improve financial discipline and infrastructure funding. b. Applicable to banks, cooperative banks, financial institutions, and NBFCs (middle layer and above) for specific NFB services. 2. General Guidelines - a. NFB facilities should be given only to customers with fund-based limits (with some exceptions). b. Regulated Entities (REs) must include NFB policies in their credit policy covering risk, monitoring, security, fraud prevention, and controls. 3. Guarantees and Co-Acceptances - a. Guarantees must be irrevocable, unconditional, and clearly specify payment terms. b. Banks must have limits for issuing guarantees, especially unsecured ones. 4. Partial Credit Enhancement (PCE) - a. PCE improves bond ratings and must follow strict risk, capital, and exposure norms. b. Limits apply: A single RE can provide up to 50% PCE of the bond issue; total PCE exposure is capped at 20% of Tier 1 capital. 5 Operational and Technological Controls - a. Institutions must maintain segregation of duties, access controls, and business continuity plans. b. All regulated entities must disclose NFB credit facility details in their financial reports. For more information, please refer to the attached document.

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