RBI Circular on Related-Party Exposures: Implications for NBFCs and FinTechs

The Reserve Bank of India’s circular on related-party exposures requires NBFCs and allied entities to adopt board-approved policies on pricing, limits and disclosure. The circular applies to transactions with directors, promoter group entities, and senior management and their relatives.

Key requirements

• Adopt a board-approved related-party policy covering identification, arm’s-length pricing and aggregate exposure limits.
• Disclose material exposures in quarterly statements and in the annual financial statements per the format prescribed.
• Obtain prior board approval for exposures above internal thresholds and note them in audit-committee minutes.

Boards should reconcile this RBI framework with SEBI RPT norms where they overlap, and ensure that internal audit scopes are updated to test these controls every quarter.