RBI Unveils Sweeping Reforms in Development and Regulatory Policies

On February 6, 2026, the Reserve Bank of India (RBI) released a Statement on Development and Regulatory Policies, detailing a series of measures aimed at enhancing regulation, promoting financial inclusion, and improving market efficiency. These reforms are designed to strengthen consumer protection, ensure financial system stability, and support growth across various sectors of the economy.

The key measures announced by the RBI can be broadly categorized into four areas: regulations, payments systems, financial inclusion, and financial markets.

Regulations 1. Preventing Mis-selling of Financial Products: - The RBI will issue instructions to Regulated Entities (REs) to prevent the mis-selling of financial products, ensuring that products align with customer needs and risk appetite.

2. Harmonizing Loan Recovery Practices: - Draft instructions will be issued to standardize loan recovery practices across all REs, establishing unified standards for the engagement and conduct of recovery agents.

3. Revising Customer Liability Rules: - Customer liability rules for digital fraud will be revised to include compensation mechanisms for small-value fraudulent transactions, reflecting the technological advancements since 2017.

4. Lending to Real Estate Investment Trusts (REITs): - Commercial banks will now be permitted to lend to REITs, with safeguards similar to those for Infrastructure Investment Trusts (InvITs), aligning financing norms and deepening real-estate financing channels.

5. Rationalizing Lending Norms for Urban Cooperative Banks (UCBs): - Lending norms for UCBs will be simplified, including changes to unsecured loan rules, limits for nominal members, and housing loan conditions through a tiered approach.

6. Exempting Low-Risk NBFCs from Registration: - Type-I NBFCs with assets not exceeding ₹1,000 crore can be exempted from RBI registration, reducing the compliance burden for low-risk entities.

7. Easing Branch Expansion for Gold-Loan NBFC-ICCs: - Gold-loan NBFC-ICCs with over 1,000 branches will no longer require prior RBI approval to open new branches, easing expansion due to their strong governance framework.

Payments System - To promote safer digital payments, the RBI will issue discussion papers introducing calibrated safeguards such as lagged credits and additional authentication for specific user groups like senior citizens. These measures aim to mitigate fraud and strengthen customer protection.

Financial Inclusion 1. Revising the Lead Bank Scheme: - The Lead Bank Scheme (LBS) will be revised to enhance its effectiveness. A unified portal will be launched to consolidate bank-wise LBS data, improving data quality and insights.

2. Updating Kisan Credit Card (KCC) Norms: - Updated KCC norms will broaden coverage and simplify operations. Changes include standardizing crop seasons, extending KCC tenure to six years, aligning drawing limits with the Scale of Finance, and including costs related to technological interventions.

3. Revising Business Correspondent (BC) Guidelines: - Based on recommendations from a committee comprising RBI, DFS, IBA, and NABARD officials, the RBI will revise BC guidelines to boost efficiency in delivering last-mile financial services.

4. Increasing Collateral-Free Loan Limits: - The collateral-free loan limit for Micro and Small Enterprises will be increased from ₹10 lakh to ₹20 lakh for loans sanctioned or renewed from April 1, 2026. This aims to support entrepreneurship and strengthen last-mile credit delivery.

Financial Markets 1. Introducing Total Return Swaps on Corporate Bonds: - To deepen the corporate bond market and enhance credit risk management, the RBI will introduce a regulatory framework enabling total return swaps on corporate bonds and derivatives based on corporate bond indices. These measures aim to improve liquidity, broaden participation, and support bond issuance across rating categories.

2. Rationalizing FEMA-Based Foreign Exchange Regulations: - The RBI has reviewed and rationalized FEMA-based foreign exchange regulations to reflect evolving domestic and global market practices. The revised framework will provide authorized banks and standalone primary dealers with greater flexibility in forex products, risk-management tools, and trading platforms.

3. Enhancing Predictability for FPIs: - Given the strong utilization of over 80% of the ₹2.5 lakh crore VRR limit, the RBI will enhance predictability and ease of doing business for Foreign Portfolio Investors (FPIs) by (a) counting VRR investments under the General Route limits, and (b) offering additional operational flexibilities. These reforms aim to attract long-term foreign investment into India’s debt markets.

Capacity Building - Mission SAKSHAM (Sahakari Bank Kshamta Nirman) will be launched as a sector-wide capacity-building and certification program for Urban Cooperative Banks. This initiative will offer large-scale physical and digital training to about 1.40 lakh participants, with delivery in regional languages and support from UCB federations.

All these measures are designed to strengthen consumer protection, enhance financial system stability, and support growth across key segments of the economy. The RBI's comprehensive approach reflects its commitment to fostering a robust and inclusive financial ecosystem in India.