Lenders Law

The Reserve Bank of India (RBI) has proposed the Master Direction – Internal Ombudsman for Regulated Entities, 2025 , to replace the 2023 framework . Issued under Section 35A of the Banking Regulation Act, 1949 and allied statutes, the new draft seeks to strengthen internal grievance redressal mechanisms and ensure speedy, meaningful resolution of customer complaints through a structured, independent review within each regulated entity (RE). This article compares the new draft with the 2023 Master Direction and highlights key changes. Topic Master Direction 2023 Draft Master Direction 2025 Appointment — IO eligibility IO: retired/serving GM-equivalent; min. 7 years relevant experience; not over 70; must not have been employed by the RE or related parties. Adds if serving, must relinquish prior post. Explicit permission ...

The Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 have been the governing framework for foreign entities establishing Branch Offices (BOs), Liaison Offices (LOs), Project Offices (POs), or other business entities in India. Now, the Reserve Bank of India, on 3rd October, 2025, published  Draft Foreign Exchange Management (Establishment in India of a branch or office) Regulations, 2025  proposing several clarifications, procedural updates, and operational guidelines to streamline and modernize the framework. The 2025 draft keeps the core eligibility and operational principles of FEMA 2016 but streamlines processes, strengthens reporting and compliance, formalizes closure and appeal mechanisms, and assigns explicit responsibilities to designated banks. It is designed to make foreign office establishment in India more transparent and accountable while retaining flexi...

Provision ECB 2018 Draft ECB 2025 Amendment 1. Eligible borrowers A person resident in India (other than an individual) incorporated, established or registered under a Central Act or State Act may raise ECB, subject to the condition that it is permitted to borrow in terms of the applicable laws. Clarifies- (1) An eligible borrower under a restructuring scheme or CIRP may raise ECB only if plan permits. (2) An eligible borrower under pending investigation/adjudication/appeal may raise ECB, must disclose to designated AD, which informs agencies. 2. Recognised lenders An eligible borrower may raise ECB from: - A person resident outside India; - A branch outside India or in IFSC of entity whose lending business is regulated by RBI. No major change; includes branches in IFSC and regulated lenders 3. Cur...

In a significant move towards regulatory simplification, the Reserve Bank of India (RBI) has consolidated the existing universe of regulatory instructions issued up to October 9, 2025 into 238 Draft Master Directions . This consolidation spans 11 types of regulated entities , including banks, NBFCs, payment system operators, and others. Importantly, the consolidation also incorporates Scale Based Regulations (SBR) for NBFCs , reflecting the RBI’s risk-based and size-oriented approach to supervision. As part of this initiative, approximately 9,000 circulars , including Master Circulars and Master Directions currently administered by the Department of Regulation, are proposed to be repealed . This is intended to reduce duplication, simplify compliance, and provide a more coherent regulatory framework for all stakeholders. Key Highlights 238 Draft Master Directions now consolidate prior instructions across 11 entity types. Scale Based Regulations (SBR) for NBFCs included to...

  Introduction: Why This Amendment Matters In the continuously evolving credit and regulatory landscape, timeliness and accuracy of credit data have become critical to risk assessment, early detection of stress, and better decision-making by lenders, regulators, and markets. The Reserve Bank of India’s draft “Credit Information Reporting (1st Amendment) Directions, 2025” seeks to strengthen the frequency and nature of data flows between regulated entities (banks, NBFCs, etc.) and Credit Information Companies (CICs). The key proposal: a transition to weekly submission of credit information to CICs. This shift is aimed at enhancing the granularity, freshness, and responsiveness of credit intelligence across the financial system. Key Proposal: Weekly Credit Information Submissions At the heart of the draft amendment is the proposal that lenders move from their current bi- monthly reporting of borrower credit data to weekly submissions . This change means that new loans, rep...

  Introduction: Why the RBI Proposed The Directions In recent years, concerns have intensified over governance lapses and concentration of exposures within related entities in the NBFC sector. Some NBFCs have been criticised for routinely granting favorable terms to promoter-related parties or renewing limits without adequate scrutiny—raising red flags about potential conflicts of interest, insider lending, and erosion of financial soundness. Moreover, as India’s financial architecture evolves, there is a drive to align NBFC regulatory norms with banking sector practices and draw lessons from corporate and securities regulations. The Reserve Bank of India (Non Banking Financial Company- Lending to Related Parties) Directions, 2025- Draft aims to bring similar discipline, transparency, and accountability to the non-banking lending space. By prescribing clear boundaries, independent oversight, and mandated reporting, the RBI seeks to preempt risks of moral hazard, reduce opac...

Section 128 of the Indian Contract Act, 1872 stipulates: “ The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract . Laxmi Pat Surana v. Union Bank of India (2021, SC) – A guarantor’s liability arises the moment the principal borrower commits default. SBI v. Athena Energy Ventures (2020, NCLAT) – A creditor can proceed simultaneously against the corporate debtor and guarantor. Thus, it was understood that once the principal borrower has defaulted, and an IBC petition is being filed for the principal borrower, relevant steps may also be taken against the guarantor for initiation of the guarantor's insolvency proceedings simultaneously.  The Turning Point — SBI v. Deepak Kumar Singhania (2025, NCLAT) In February 2025, the NCLAT in State Bank of India v. Deepak Kumar Singhania changed the ground reality. What Happened SBI had lent to LML Ltd. , which defaulted and went into liquidation. ...

The Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 (“PG Rules, 2019”) provide a framework for initiating insolvency proceedings against personal guarantors of corporate debtors. One of the critical procedural requirements under Rule 7(1) is the issuance of Form B notice by the financial creditor or operational creditor to the guarantor. This notice serves as a demand for repayment and must be accompanied by supporting documents to substantiate the default. 1. Purpose of Form B Notice Form B notice is a formal communication to the personal guarantor , informing them of the default by the corporate debtor and demanding repayment of the guaranteed debt. Proper documentation ensures the guarantor is aware of the exact amount of liability , and reduces chances of disputes in later proceedings. Annexing relevant documents also strengthens the application when filed wi...

  The Insolvency and Bankruptcy Code, 2016 (“ IBC ”) created the framework of Information Utilities (IUs) to serve as authenticated repositories of financial information. A record of default from an IU is treated as conclusive evidence under Section 215 of the Code. A recurring issue for creditors is: Should the default be filed with an IU before sending a demand notice, or only before filing an insolvency application? Statutory Position Section 215(2) IBC provides that financial creditors shall submit information of default to an IU. Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016  (" Application to AA Rules ") requires that an application be accompanied by a record of default from an IU “wherever available”. Further, Regulation 20(1A) of the IBBI (Information Utilities) Regulations, 2017 , as inserted by Notification No. IBBI/2022-23/GN/REG085 dated 14 June 2022, expressly provides that:  “Before filing an applicatio...

When an operational creditor issues a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 , the corporate debtor has 10 days to: Repay the amount due, or Bring to notice the existence of a dispute . Sometimes, the real issue arises when a reply is sent — but instead of being a genuine dispute, it is a tactic to stall or avoid insolvency proceedings, or instead of a full reply, the corporate debtor sends an “interim reply” within those 10 days — saying something like “ We are in the process of preparing a detailed response to the Demand Notice. Meanwhile, we request you to kindly treat this communication as our interim/ holding response” .  Now, the question which arises here is: does this obligate the creditor to wait further before filing an application under Section 9? The Legal Framework Statutory Timeline : The Code strictly prescribes 10 days from receipt of the Section 8 notice. There is no provision for extending this timeline merely bec...

The Companies Act, 2013 lays down strict provisions for acceptance of deposits by companies. Sections 73–76 and the Companies (Acceptance of Deposits) Rules, 2014 regulate this area. However, the framework also provides specific exemptions for private companies. These exclusions often create confusion, particularly around shareholder and director loans. 1. Loan from director or director's relative: Rule 2(1)(c)(viii) : Any amount received from a person who, at the time of receipt, was a director or a director's relative , is not considered a deposit . Conditions: Only applicable to private companies. Disclosure in Board’s Report. Obtain a declaration that the loan has been given out of own funds, and not being given out of funds acquired by him/ her by borrowing or accepting loans or deposits from others.  .  2. Loan from shareholders MCA Notification No. GSR- 583(E) dated 13th June, 2017 granted further relief to private companies by exempting them from S...