RBI’s final directions on financial services businesses of commercial banks ease re-organisation requirements and potential operational disruption for many bank groups, says Crisil Ratings

The guidelines provide flexibility with respect to overlapping lending activities within major bank groups

The Reserve Bank of India’s finalized framework governing commercial banks’ financial services operations has mitigated restructuring needs while heightening compliance obligations for banking groups, as per Crisil Ratings’ analysis.

Banking groups now maintain greater operational flexibility regarding concurrent lending operations across subsidiaries and parent entities. The regulatory update supersedes earlier restructuring mandates that would have impacted a dozen banking conglomerates managing 55% of sectoral credit deployment.

The Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Directions, 2025 preserves several draft provisions released in October 2024. These include mandatory adherence to upper-layer NBFC regulations, uniform lending restrictions across group entities, and a 20% ownership cap for bank-linked asset reconstruction companies.

Compliance Alignment

“The framework addresses regulatory asymmetry by harmonizing norms across banking conglomerates, thereby reinforcing systemic resilience while accommodating business model diversity,” noted Crisil analysts.

Subha Sri Narayanan of Crisil Ratings highlighted: “Had the original draft been implemented unchanged, restructuring would have affected 2-6% of consolidated advances across twelve major banking groups. The finalized version enables continued servicing of distinct customer segments through specialized group entities.”

Current assessments indicate only two of 26 bank-affiliated lending entities qualify as upper-layer NBFCs. Remaining institutions must achieve full regulatory alignment by March 2028.

Investment Limitations

The directions introduce uniform restrictions on specific loan categories across banking group entities while grandfathering existing compliant operations. The maximum 20% shareholding threshold in asset reconstruction companies emerges as a notable constraint.

Vani Ojasvi of Crisil Ratings observed: “Thirteen ARCs currently maintain bank ownership stakes. Just two exceed the prescribed ceiling, necessitating divestment before March 2028. Ownership adjustments will factor into our credit evaluations as implementation progresses.”

Published on December 9, 2025