RBI Update - Reserve Bank of India (Small Finance Banks - Concentration Risk Management) Amendment Directions, 2026

The Reserve Bank of India has issued the Reserve Bank of India (Small Finance Banks - Concentration Risk Management) Amendment Directions, 2026 to comprehensively revamp the Capital Market Exposure (CME) framework for Small Finance Banks (SFBs) in alignment with the revised Credit Facilities regime. Under the Reserve Bank of India (Small Finance Banks - Concentration Risk Management) Directions, 2025, CME norms were structured under earlier exposure classifications, with separate sub-sections (including paragraphs 28, 30–40, Section C, etc.) prescribing limits and treatment. Definitions such as “CMIs,” “Collateral,” “Primary Security,” and “Non-debt Mutual Funds” were either absent or not harmonised with the Credit Facilities Directions, and the methodology for computation and exclusions lacked the granularity introduced under the 2026 reforms.

The amendment

(i) inserts new definitions aligned with the Credit Facilities framework and deletes outdated provisions;

(ii) comprehensively substitutes paragraph 28 with a new paragraph 28A expanding CME to include direct and indirect exposures such as investments in equity instruments, non-debt mutual funds, REITs/InvITs/AIFs, credit facilities to CMIs, promoter acquisition finance, underwriting commitments, IPCs, and clearing member trade exposures;

(iii) introduces paragraph 31A prescribing prudential CME ceilings—40% of Tier 1 capital (aggregate) and 20% for direct investment exposures—along with intra-day sub-limits;

(iv) revises computation norms under new paragraphs 40A and 40B, including calibrated treatment of IPCs (30%/50%), intraday QCCP exposures (30%), and offsetting by cash/G-Secs; and

(v) rationalises exclusions, including specified critical financial infrastructure entities such as National Stock Exchange, Bombay Stock Exchange and National Payments Corporation of India.

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