RBI Update - Reserve Bank of India (Small Finance Banks – Undertaking of Financial Services) Second Amendment Directions, 2026

The Reserve Bank of India (Small Finance Banks – Undertaking of Financial Services) Second Amendment Directions, 2026, effective from January 1, 2027, revise the regulatory framework governing agency business and referral services undertaken by Small Finance Banks (SFBs). The amendments redefine “Agency Business” and “Referral Services”, introduce new definitions for “Regulated Financial Products and Services”, “Third-party Product and Service (TPPS)” and “Third-party Product and Service Provider (TPPSP)”, and remove certain existing provisions relating to agency arrangements. Under the revised framework, SFBs may undertake agency business only for regulated financial products and services on a fee basis without risk participation and must comply with the provisions of the RBI (Small Finance Banks – Responsible Business Conduct) Directions, 2025. Banks must ensure that TPPS providers have robust grievance redressal mechanisms. For referral arrangements, SFBs may only refer customers to TPPS providers for regulated financial products and services, with their role being strictly limited to referral and marketing, without engaging in sales. The Directions also mandate transparency through publication of TPPS lists on digital platforms, prohibit integration of TPPS processes with bank platforms except through redirection links, and require due diligence on TPPS providers to mitigate reputational risks. Additionally, customer service and conduct-related provisions are consolidated under the RBI (Small Finance Banks – Responsible Business Conduct) Directions, 2025.