The Reserve Bank of India (RBI) has issued the Commercial Banks – Resource Raising Norms Directions, 2025, effective from November 28, 2025. These RBI directions aim to strengthen the financial sector by enabling commercial banks to raise long-term resources for infrastructure and affordable housing projects. Let’s break down the key highlights and implications of these norms.
What Are the RBI Resource Raising Norms?
Under Section 35A of the Banking Regulation Act, 1949, RBI has introduced a framework for commercial banks (excluding Small Finance Banks, Local Area Banks, Payments Banks, and Regional Rural Banks) to issue long-term bonds. These bonds will help banks finance:
- Infrastructure sub-sectors as defined in the Harmonized Master List (HML).
- Affordable housing loans for individuals.
This move is expected to boost credit flow to critical sectors and support India’s economic growth.
Key Features of Long-Term Bonds
The directions specify several important features for these bonds:
- Minimum Maturity: Bonds must have a maturity of at least seven years.
- Type of Instrument: Fully paid, redeemable, unsecured, and ranking pari-passu with other unsecured creditors.
- Currency: Denominated in Indian Rupees.
- Interest Rate: Can be fixed or floating, with floating rates linked to a market benchmark.
- Issuance Method: Through public issue or private placement, complying with SEBI norms, including mandatory credit rating and listing.
- No Deposit Insurance: These bonds are not eligible for deposit insurance.
- Options: Must be issued in plain vanilla form, without embedded call or put options.
Regulatory Incentives for Banks
To encourage issuance, RBI offers significant regulatory benefits:
- Exemption from CRR and SLR: Bonds will not be included in Net Demand and Time Liabilities (NDTL), reducing statutory reserve requirements.
- Priority Sector Lending (PSL) Relaxation: Eligible bonds will be excluded from Adjusted Net Bank Credit (ANBC) for PSL computation.
- Eligible Credit (EC): Refers to outstanding standard loans for infrastructure and affordable housing with original maturities over seven years.
These incentives are subject to ceilings based on the amount of eligible credit and bonds issued.
Crossholding Norms
Banks can invest in bonds issued by other banks, but with restrictions to prevent double counting:
- Investment capped at 2% of Tier 1 Capital or 5% of issue size (whichever is lower).
- Aggregate holding limited to 10% of total non-SLR investments.
- No more than 20% of primary issue size can be allotted to banks.
- Banks cannot hold their own bonds.
Compliance and Reporting
Banks issuing these bonds must:
- Comply with FEMA regulations where applicable.
- Submit detailed reports to RBI’s Department of Supervision, including amount raised, maturity, interest rate, and offer document.
Repeal of Previous Guidelines
With these directions, RBI has repealed earlier resource-raising guidelines for commercial banks. However, actions taken under previous norms remain valid, and existing approvals will be deemed compliant with the new directions.
Impact on Banking and Economy
The RBI’s 2025 directions are a strategic step toward:
- Deepening the bond market for infrastructure financing.
- Reducing regulatory burden on banks issuing long-term bonds.
- Promoting affordable housing, aligning with government initiatives.
By incentivizing banks to raise long-term funds, RBI aims to ensure sustainable credit flow to sectors critical for India’s development.
Conclusion
The Reserve Bank of India (Commercial Banks – Resource Raising Norms) Directions, 2025 mark a significant milestone in strengthening India’s financial ecosystem. By enabling commercial banks to issue long-term bonds for infrastructure and affordable housing, RBI is fostering sustainable credit growth and reducing regulatory burdens. These norms not only deepen the bond market but also align with national priorities like infrastructure development and housing for all. For banks, this is an opportunity to diversify funding sources, while for the economy, it promises robust growth and financial stability.