The Reserve Bank of India's newly constituted Payments Regulatory Board held its inaugural meeting in Mumbai on Monday, January 5, marking a significant milestone in India's payment system governance. The meeting was chaired by Governor Sanjay Malhotra and brought together key stakeholders to operationalize the new regulatory framework for payment systems.

Strategic Vision and Regulatory Framework

The board meeting focused extensively on reviewing the draft Payments Vision 2028, providing strategic guidance to further develop India's payment ecosystem. This vision comes at a crucial time as India's digital payments sector anticipates unprecedented growth, with PwC projecting transaction volumes to nearly triple by FY30. The Payments Regulatory Board was established following amendments to the Payment and Settlement Systems Act, 2007, which came into effect in May 2025.

Comprehensive Review and Analysis

During the meeting, members conducted a thorough review of the functions of the Department of Payment and Settlement Systems. The session examined both domestic and global payment landscapes, ensuring India's regulatory approach remains aligned with international best practices while addressing local market needs. The board discussed key focus areas across domestic and global payment systems to enhance the regulatory framework.

Digital Payments Survey and Future Outlook

The meeting featured key findings from RBI's recent Survey on Digital Payments, which provided valuable insights into usage patterns and adoption trends across the country. These findings will inform policy decisions and help shape the regulatory framework to support continued growth in digital payment adoption. The Payments Regulatory Board is expected to play a central role in shaping India's payment systems, with a focus on enhancing efficiency, security, and innovation while maintaining the stability and integrity of the payment ecosystem.

The Reserve Bank of India has issued comprehensive Amendment Directions on Lending to Related Parties for banks, non-banking financial companies (NBFCs), cooperative banks, and All India Financial Institutions (AIFIs), introducing stricter governance and transparency measures around related-party transactions. The revised guidelines, incorporating feedback from the draft directions issued in October 2025, will take effect from April 1, 2026.

Key Framework Changes

The updated regulatory framework brings significant modifications to related-party lending practices across the financial sector. Under the amended directions, equity investments in related parties are excluded from regulatory scope, while investments in debt instruments remain covered. The RBI has exempted certain NBFC categories—those without public fund access and customer interface—along with Core Investment Companies (CICs) that primarily lend to group companies.

Transition and Compliance Provisions

To ensure smooth implementation, the RBI has allowed existing non-compliant related-party transactions to continue until enhancement, renewal, re-pricing, or modification occurs. However, such exposures cannot be renewed or reviewed unless fully compliant with new regulations. This approach replaces the earlier proposed one-year run-off period, ensuring non-disruptive implementation while maintaining regulatory oversight.

Enhanced Definition and Scope

The amendment introduces an expanded definition of related parties, aligning with the Companies Act, 2013, and Insolvency and Bankruptcy Code provisions. For banks and NBFCs, related parties now include promoters, directors, key managerial personnel and relatives, plus shareholders holding over 10.00% equity. The definition extends to entities where related parties exercise significant influence, trust structures with related trustees or beneficiaries, and introduces reciprocally related persons for banks.

Materiality Threshold Framework

A new materiality threshold system ensures proportional regulatory approach across different institution sizes:

Disclosure and Governance Requirements

The directions mandate stricter disclosure requirements, with regulated entities reporting aggregate contract and arrangement values with related parties in financial statements. Despite stakeholder suggestions to exclude contracts, the RBI maintained oversight, noting contracts can channel undue benefits to related parties. Exposures above materiality thresholds require Board or dedicated Committee on Lending to Related Parties sanctioning, while loans fully secured by government securities, fixed deposits, or life insurance policies with loan-to-value ratios not exceeding 100.00% are exempt from Board approval.