Key Changes in Regulatory Guidelines Effective April 1, 2025

1. Priority Sector Lending (PSL) Guidelines by RBI

• Objective: To enhance credit flow to priority sectors and foster inclusive growth.
• Changes:
  • Increased Limits:
    • Education Loans: Raised limits to encourage access to education financing.
    • Renewable Energy Loans: Expanded support for financing renewable energy projects.
    • Affordable Housing Loans: Increased limits for loans under affordable housing schemes.
• Impact: These changes are expected to boost lending to key sectors that contribute to economic growth and social welfare.

Risk Weights on Bank Loans to Non-Banking Financial Companies (NBFCs)

• Change: The RBI has restored the risk weight on bank loans to NBFCs from 125% to 100%.
• Effective Date: April 1, 2025.
• Impact: This adjustment reduces the capital burden on banks lending to NBFCs, helping the sector deal with higher borrowing costs.

New Guidelines for UPI Transactions

• Implemented by: National Payments Corporation of India (NPCI).
• Changes:
  • Mobile Number Record Updates: Banks and Payment Service Providers (PSPs) must update mobile number records weekly to reduce transaction errors.
  • Opt-In Requirement: UPI users must explicitly opt-in for seeding their UPI numbers.
• Purpose: These guidelines are aimed at enhancing security and reducing fraudulent transactions in the UPI ecosystem.

ATM Charges Increased

• Change: The maximum fee that banks can charge for ATM cash withdrawals has been increased to ₹23.
• Effective Date: May 1, 2025.
• Previous Limit: ₹21.
• Impact: The fee hike may lead to increased costs for customers withdrawing cash from ATMs.

Revised SRO Guidelines for Micro Finance Institutions (MFIs)

• Implemented by: RBI-recognized Self-Regulatory Organization (SRO) for MFIs, MFIN.
• New Guidelines:
  • Borrower Limit: A borrower will not be able to obtain loans from more than four lenders simultaneously.
• Objective: This rule aims to reduce over-borrowing and mitigate the risk of excessive debt burdens on borrowers.

Prompt Corrective Action (PCA) Framework for Urban Cooperative Banks

• Change: The existing Supervisory Action Framework (SAF) for weak Urban Cooperative Banks (UCBs) will be replaced by the PCA framework.
• Effective Date: April 1, 2025.
• Key Criteria for PCA:
  • Consecutive Losses: Banks incurring losses for two consecutive years.
  • Net NPAs: Net Non-Performing Assets (NPAs) above 6% but below 9%.
  • Capital Adequacy Ratio (CAR): CAR up to 250 basis points below the required level.
• Impact: The PCA framework is designed to be principle-based, with fewer parameters, providing RBI with more flexibility to address financial stress in UCBs.