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The Reserve Bank of India (RBI) formulates regulations for the Financial Services Amendment Directions 2025. It’s primarily for the safe and orderly operation of domestic banks and financial institutions. Issued on December 5, 2025, this update promotes clarity, risk segregation and clear guidelines on investment limits in various financial services.
The Reserve Bank released the draft guidelines in October 2024 and finalized the final version after collecting feedback from various stakeholders. These revised guidelines help in protecting core banking activities and increasing control over the activities of group-based institutions.
RBI updates the financial services rules to strengthen the setting of business transaction limits, risk management, and the regulatory framework at the individual and group levels. The guidelines outline governance, risk boundaries, and maintaining regulatory discipline in the market. All the NBFC license seekers and fintech enthusiasts must have a fair idea of the RBI Financial Services Amendment Directions 2025.
The revised guidelines under Financial Services Amendment Directions 2025 cover five types of financial service providers:
The new Financial Services Amendment Directions 2025 have been laid down for each category as mentioned above. The guidelines clarify which activities a bank or group entity can undertake on a departmental basis. These activities should be undertaken only through subsidiaries or joint ventures.
Financial risk has been controlled by setting investment limits. In addition, the conditions for participation in AIF, ARC, REIT/InvIT are now clarified. The objectives ensure a clear distinction between direct banking activities and subsidiary or group activities.
New business lines commence as per the board-approved policy of stakeholders, and it maintains transparency through regular reporting and compliance processes. As a result, regulation, risk management, and customer protection become strong together. It will keep the country’s financial system stable. Business dreamers eyeing a business launch and growth in the fintech and lending space must know about the frameworks before opting for NBFC registration in India.
The 2025 RBI Financial Services Amendment outlines a structured, entity-based framework to standardize how different financial institutions conduct, manage and govern their financial services activities.
The revised rules under Financial Services Amendment Directions 2025 introduce a strict, more uniform regime for commercial banks, reshaping how they deliver financial services, manage group level activities and engage in regulated business lines.
The revised Commercial bank amendment directions were implemented w.e.f. December 5, 2025, as a part of the Master Direction of November 2025. Banks categorized under NBFCs and HFCs will now apply the same rules (Para 18(4)). However, institutions under NOFHC will not be considered equivalent to such institutions.
“Agency Business” has been newly introduced. Now, the bank will not risk selling financial products to third parties but just provide services.
In “Referral Service”, the bank will only provide product information to the customer; the bank’s brand or platform will not participate in any operation.
The definition of “Group Entity” is now as per IND-AS.
Practical banking, such as loan disbursement and deposits, are conducted only through banks. However, loans are approved through NBFCs/HFCs and operate as per UL-NBFC norms.
Insurance, Mutual Fund, AMC, Brokerage, PMS, Pension or Investment Advisory are mandatory to be done only through subsidiaries or group companies. A business must be ideally conducted through only one entity in the group.
RBI approval will be required first to start any new type of activity. Banks that do not comply with the guidelines will not be able to enter the new segment after April 1, 2026.
Total investment in a single entity could be 10% but not exceed 20%. Exemptions will be available for 20%-30% investment, but a time-bound plan needs to be submitted. Investment in Category-III AIF is strictly prohibited. Investment in Category I/II will be kept within specified limits. Investment in REIT/InvIT will not be allowed to exceed 10% of the unit capital. Apart from this, exposures will have to be reported to ICAAP, and if any limit is breached, it is mandatory to report to PRAVAAH within 15 days.
The updated directions standardize the compliance and operating framework for small finance banks, aligning them with stricter risk, governance, and business-undertaking standards.
The scope of financial services for small finance banks has been revised as per the Banking Regulation Act, 1949. This was revised on 5 December 2025 that led to a new framework for the general instructions.
Now the meaning of the term “Agency business” has been explained more clearly. The bank plays a supporting role in the marketing and sale of third-party financial products and does not take any risk. In “Referral services“, the bank will only provide information to the customer; the name of the bank cannot be used in the product documents, and the platform of the bank will not be linked to the product activities.
Banking services are provided according to the specific department. Banks formulate policies based on risk assessment and get RBI approved to commence a new business. A separate subsidiary can’t be formed. Mutual funds, insurance, pension, portfolio management, or brokerage services can be provided only through group companies.
The maximum limit is 10% for individual investment of a bank, which can’t exceed 20%. However, in case of need to save an institution or in case of debt restructuring, the investment can exceed 30%. Normally, approval is not required for investments below 20%, but RBI approval is required for investment of 20% or more, and a plan for the sale of shares will also have to be submitted later.
Investment in Category-III AIF is completely prohibited. Contributions limit is a maximum of 10% in Category I or II. It ensures that the bank does not bypass the regulatory limits through indirect investment. Investment in REIT or InvIT will be within the limit of 20% of the net worth of the shop, and investment in a single scheme cannot exceed 10%. The bank will now be able to act as a professional clearing member in the equity derivatives segment.
As per the revised definition, Agency Business facilitates the sale of approved financial products, such as insurance, mutual funds, and pension products. This includes providing sales-related information, promotion, handling customer complaints, and post-sales support.
The role of the bank in the referral system is strictly limited to providing information. The bank will not actively be involved in any process of sales, application, or beyond. The bank’s brand cannot be used by the external POSP in their marketing or sales process. The bank’s name can be added to the documents for identification purposes. The customer will be directed to the external TPPSP that ensures a clear separation between the bank’s digital interface and third-party sales platform.
Here, the framework for agency-based sales and referral-based introductions has been clearly separated. The bank will be able to enter into agreements only with regulated financial institutions and will have to maintain consistency with the Master Directions published in November 2025.
Most importantly, the bank will not take any financial risks. This will allow payment banks to stick to their deposit-based model, and customers will have the opportunity to use third-party services safely. Payment bank license holders should be aware of this.
NBFCs are part of a group of designated commercial banks, following the rules applicable to banks. When the same type of financial activity is undertaken by both the NBFC and its parent bank, the same rules have to be followed. This maintains the same type of risk control and ethical standards in the same business. It is mandatory to follow the Commercial Banks – Undertaking of Financial Services Directions, 2025. This ensures transparency in monitoring the activities of NBFCs belonging to the group.
This change will require harmonization of risk management, capital allocation, reporting processes, and internal policies to bank-level norms. It prevents regulatory arbitrage, enhances customer protection, and maintains stability at the group level. The framework helps NBFC–bank groups operate on a level playing field.
It has been more clearly defined where the activities will be within the banking group with the implementation of the revised guidelines of 2025.
According to the new framework, the new policy activities permitted for banks as per Section 6(1) of the Banking Act, 1949, are within the banking entity. Similar services will not be applied across different institutions of the group but will be operated under one institution, thus ensuring clear risk control.
Specialized activities such as mutual fund business, insurance services, pension fund management, investment advisory, portfolio management and broking services are carried out through Subsidiaries, Joint ventures or associate institutions. In this, compliance, licensing, and risk management are more specific.
In general, prior approval of the RBI is not required to start such a business, but the RBI has to be informed within 15 days of the board’s decision. However, prior approval is mandatory for starting any new or different type of business.
This prevents entities from investing or performing activities strictly prohibited by banks. So, integrated control, customer protection, and ethical financial discipline are maintained within the group.
The new structure under Financial Services Amendment Directions 2025 will bring improvements to various levels in the banking group.
If the same type of financial service is operated in different institutions, there will be confusion in decision-making and risk management. The new structure will reduce risks and clarify the role of each institution.
The activities of the bank and the related group of companies will now operate under separate licenses and standards. So, service quality and the ability to determine risk responsibilities will increase.
Capital investments, AIF investments, group exposures, etc., will now be reported according to a single principle. This will also make supervisory intervention easier.
Having a specific investment limit in an institution will reduce unwanted risk-taking. This will strengthen the return distribution and balance sheet in the long run. This new framework will create discipline within the entire financial group and bring more stability to asset management.
The 2025 RBI Financial Services Amendment policy change is a significant step in the management of activities and risks within the banking group. It promotes transparency for the bank and group entities’ activities in discipline and security for long-term. The Financial Services Amendment Directions 2025 will bring positive changes across the industry in terms of protecting customer interests, transparency of transactions, and strategic business allocation.
Banks and group NBFCs, HFCs or NOFHCs will now have to properly complete the compliance, document-updating and approval process as per the policy. Here, Enterslice provides policy clarification, RBI licensing assistance, compliance documentation, and advisory support for various banking-regulated entities. If your organization wants to adapt to this change, Enterslice expert team is ready to help.
The main objective of this revision is to clarify the distribution of activities within the banking group and strengthen risk management. A clear framework has been created regarding the activities and services that will be carried out under the bank and handled by the group company. This will reduce regulatory arbitrage, increase customer protection and create transparency in the investment, approval and reporting system.
Activities directly related to the bank will now have to be handled within the bank. Non-bank activities will be handled through group companies. This will increase the focus on the bank's core financial services, and liquidity, capital planning, and risk provisioning will be more organized. At the same time, investment exposure limits will be clearly defined.
Since the activities of payment banks are limited, they require different controls. They cannot provide loans, so they need separate policies in the group structure, investment limits and risk containment. The revised guidelines force Payment Banks to remain within their approved services that ensure the safety of customer funds and institutional status.
NBFCs are part of banking groups and will now follow the same investment, reporting and approval system as banks. If both banks and NBFCs do the same activity, the rules of the respective banks will be applicable. This will make it easier to determine institution-wide risk and supervise at the consolidated level.
After the publication of the draft, various organizations provided feedback. After reviewing the feedback, RBI has made the revised framework more realistic. This implements the policy in practice, reflects the business needs of the industry and maintains transparency in the financial system. Stakeholder feedback also increases the acceptability of the policy.
Their activities will now run within a clearer framework. There will be scope to manage non-core services through group strategies. The new investment limits and approval process will reduce risk, bring transparency to the expansion of activities and facilitate the development of sustainable service plans for small borrowers.
The board will have to formulate policies on risk allocation, capital exposure, investment of group entities, and transfer of activities. The board will have to approve the decision, which activities will remain under the bank and go to the group entity. In addition, the responsibility of maintaining reporting timelines will also have to be monitored at the board level.
The revised framework will be effective from December 5, 2025. However, institutions will be allowed to transform in a phased manner to streamline group companies, investment policies and management structures. RBI is expected to clarify the instructions in phases and conduct periodic reviews.
There will be transparency in the operating service. The core banking services will be available through the bank itself, and investment, insurance or advisory services will be provided through separate group entities. So, accountability, service standards, dispute resolution, and complaint redressal will be more direct and effective.
Various operational, legal, and regulatory issues will have to be updated to implement the new framework. It is advantageous to take professional assistance in policy preparation, RBI approval, committee formation, documentation, and reporting. Enterslice provides structural advice, RBI filing, licensing assistance, and compliance monitoring services in this regard.
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