What changed
RBI inserted a new sub-sub paragraph (ix) under paragraph 10(5) of the existing Directions, requiring LABs to disclose exposures to related parties in a prescribed table format. The table covers loans (sanctioned, outstanding, SMA/NPA classification, provisions) and contracts/arrangements with related parties.
What it means for you
LABs must now systematically track and report all related party exposures, including loans and contracts, in their annual financial statements. This increases transparency and aligns with the broader credit risk management framework. Banks need to update their reporting systems and ensure compliance by April 1, 2026.
What you must do
- Update financial statement templates to include the new related party disclosure table.
- Identify and classify all related parties as per the Credit Risk Management Directions, 2025.
- Set up data collection processes for loans and contracts with related parties.
- Train finance and compliance teams on the new disclosure requirements.
- Consider early adoption of the amendments before the April 1, 2026 deadline.
Who it affects
Local Area Banks (LABs), Compliance officers of LABs, Finance and accounting teams of LABs, Auditors of LABs
What is the effective date for these new disclosure requirements?
The amendments come into force from April 1, 2026, but banks may choose to implement them earlier.
What specific information must be disclosed for related party loans?
LABs must disclose aggregate value of loans sanctioned during the year, outstanding loans, their proportion to total credit exposure, SMA/NPA classification, and provisions held.
Does this apply to all related parties or only those defined in the Credit Risk Management Directions?
The disclosure applies to related parties as defined in the Reserve Bank of India (Local Area Banks – Credit Risk Management) Directions, 2025.