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Regulatory Updates
August 2026
1.RESERVE BANK OF INDIA UPDATES
Special Rupee Vostro Accounts (SRVAs).
Circular dated July 17, 2026
The Reserve Bank of India (“RBI”) issued a circular consolidating and rationalising the existing framework governing Special Rupee Vostro Accounts (“SRVAs”) used for settlement of crossborder transactions in Indian Rupees. The circular supersedes earlier instructions issued between 2022 and 2025 and brings the applicable provisions relating to the opening, funding, utilisation, investment, documentation and reporting of SRVAs into a consolidated framework.
Under the revised framework, Authorised Dealer Category-I (“AD Category-I”) banks may open SRVAs with overseas branches of banks or with banks incorporated outside India without prior RBI approval. SRVAs may be used for settlement of cross-border exports and imports in INR, as well as other permissible current and capital account transactions under FEMA. The accounts may be funded through inward remittances, transfers from other repatriable INR accounts and proceeds of permissible FEMA transactions.
AD Category-I banks maintaining SRVAs may also open additional current accounts for exporters and importers for trade-settlement purposes. Investment of SRVA balances in debt instruments will be subject to the applicable RBI framework governing non-resident investment in debt instruments.
Key takeaway: The circular provides a single consolidated framework for SRVAs, improving clarity for AD Category-I banks and overseas banking partners undertaking INR-based crossborder transactions.
Small Finance Banks - Asset Liability Management Amendment
Circular dated July 30, 2026
RBI issued the Reserve Bank of India (Small Finance Banks – Asset Liability Management) Amendment Directions, 2026, primarily to align the disclosure framework for the Liquidity Coverage Ratio (“LCR”) and Net Stable Funding Ratio (“NSFR”) with the revised disclosure requirements under the applicable financial-statement and capital-adequacy frameworks.
The amendment substitutes the relevant provision concerning the LCR and NSFR disclosure templates and related instructions. Small Finance Banks are now required to refer to the relevant provisions of the RBI (Small Finance Banks Financial Statements: Presentation and Disclosures) Directions and the RBI (Small Finance Banks Prudential Norms on Capital Adequacy) Directions for these disclosures.
Key takeaway: The amendment rationalises the location and cross-referencing of LCR and NSFR disclosure requirements and aligns the SFB framework with the revised Basel Pillar 3 disclosure architecture.
Revised Concurrent Audit Framework for Banks.
Circular dated July 31, 2026
RBI issued separate Reserve Bank of India (Concurrent Audit) Directions, 2026 for Commercial Banks, Small Finance Banks, Payments Banks, Urban Co-operative Banks and
Local Area Banks. The new Directions consolidate and replace the respective earlier instructions governing concurrent audit and are intended to strengthen concurrent audit as an early-warning and internal-control mechanism.
The framework places responsibility on the relevant Board-level audit oversight mechanism and the internal audit function for determining and overseeing the scope of concurrent audit. Coverage is required to be risk-based and may include areas such as cash transactions, advances, KYC/AML compliance, remittances, treasury and foreign exchange operations, card business, employee conduct, mis-selling and compliance with RBI Directions and internal policies.
The Directions also prescribe requirements concerning the appointment, eligibility, independence, accountability, remuneration, reporting and follow-up of concurrent auditors. For example, under the Commercial Banks framework, an external concurrent auditor's continuous tenure with a bank cannot exceed five years, while an auditor cannot continue with the same branch or business unit for more than three years. Retired staff engaged as concurrent auditors cannot exceed 70 years of age.
Major deficiencies and fraudulent transactions are required to be escalated promptly, while quarterly reviews of important concurrent-audit findings are to be placed before the relevant audit oversight mechanism.
Key takeaway: The revised framework increases the emphasis on risk-based audit coverage, auditor accountability, timely escalation of material findings and Board-level oversight of concurrent audit.
Cybersecurity, Technology Risk, Resilience and Assurance Framework.
Circular dated July 31, 2026
RBI issued separate entity-specific Directions on the Cybersecurity, Technology: Risk, Resilience and Assurance Framework for Commercial Banks, Small Finance Banks, Payments Banks, Urban Cooperative Banks, Non-Banking Financial Companies (“NBFCs”) and All India Financial Institutions (“AIFIs”). The Directions consolidate and update requirements relating to IT governance, information security, cybersecurity, technology risk management, operational resilience and information-systems audit.
The Directions place greater responsibility on Boards and senior management for technology and cybersecurity governance. Depending on the regulated entity and applicable framework, requirements include Board-approved IT and informationsecurity policies, appropriate IT/security committees, defined responsibilities for senior technology and security personnel, including the Chief Information Security Officer (“CISO”), and systematic identification and assessment of technology and cybersecurity risks.
The framework also addresses information-asset protection and classification, access controls, application and network security, vulnerability management, audit logs, incident response, business continuity and disaster recovery, third-party technology arrangements and information-systems audit.
For NBFCs, the requirements are differentiated based on the applicable regulatory layer and asset size, with enhanced governance and technology-risk requirements applying to larger and higher-layer entities.
The Directions came into effect immediately upon issuance.
Key takeaway: Regulated entities and their technology-service providers will need to review governance structures, cybersecurity controls, incident-response arrangements, outsourcing arrangements and technology-risk documentation against the applicable 2026 framework.
Digital Payment Security Controls.
Circular dated July 31, 2026
RBI issued separate Digital Payment Security Controls Directions, 2026 for Commercial Banks, Small Finance Banks, Payments Banks and Urban Co-operative Banks. The Directions consolidate and update the regulatory framework governing security controls for digital payment products and services.
The framework covers Board-level governance and policies, digital-payment security risk management, secure application development, authentication, vulnerability assessment and penetration testing, fraud-risk management, reconciliation mechanisms, customer protection and grievance redressal.
Specific requirements also address internet banking, mobile-payment applications and card-payment security, including appropriate controls relating to access management, encryption, transaction monitoring, security testing and protection of payment information.
Key takeaway: The revised framework places greater responsibility on banks to embed security, fraud prevention, customer protection and resilience throughout the digital-payment lifecycle.
Measures for Detection, Reporting and Monitoring of Fake Indian Currency Notes
Circular dated July 31, 2026
RBI issued instructions requiring banks to strengthen their systems for the detection, impounding, reporting and monitoring of Fake Indian Currency Notes (“FICNs”), following its assessment that the existing efforts of certain banks were inadequate.
Banks are required to implement focused training programmes for cash-handling staff. All such staff are required to be trained by October 31, 2026, while branches in districts sharing international borders are to receive priority training by September 15, 2026.
Action Taken Reports are required to be submitted through the Forged Note Vigilance Cells to the concerned RBI Issue Office by November 7, 2026, and by September 22, 2026 in respect of the priority training for branches in international-border districts.
Banks are also required to equip branches in districts having international borders with Note Authentication and Sorting Machines. Forged Note Vigilance Cells are expected to analyse FICN data to identify hotspots and trends and undertake targeted outreach and capacity-building measures.
Key takeaway: The revised instructions place greater emphasis on risk-based preparedness, staff capability, authentication infrastructure and datadriven monitoring of counterfeit currency risks.
Housing Finance Companies - Recovery of Loan Dues and Recovery Agents
Circular dated August 6, 2026
RBI issued the Reserve Bank of India (Housing Finance Companies) Third Amendment Directions, 2026, revising the framework governing the recovery of loan dues and engagement of recovery agents by Housing Finance Companies (“HFCs”). The amendment deletes the existing HFC-specific provisions relating to recovery agents under Chapter X of the RBI (Housing Finance
Companies) Directions, 2025 and introduces a new provision, paragraph 170A, requiring HFCs to comply with paragraphs 100A to 100AB of the RBI (Non-Banking Financial Companies - Responsible Business Conduct) Directions, 2025.
The amendment is intended to align the conduct requirements applicable to HFCs in relation to recovery activities with the broader NBFC responsible-business-conduct framework.
The amendment will come into effect from January 1, 2027.
Key takeaway: HFCs should use the transition period to review their recovery-agent appointment, supervision, conduct and customer-contact processes against the requirements incorporated from the NBFC Responsible Business Conduct framework.
Priority Sector Lending - Adjustment to ANBC for Specified Non-Resident Deposits.
Circular dated August 7, 2026
RBI amended the Priority Sector Lending - Targets and Classification framework to provide specific treatment for certain advances made against fresh FCNR(B) and NRE term deposits mobilised during specified periods.
For eligible fresh FCNR(B) deposits of three to five years mobilised between June 8, 2026 and September 30, 2026, advances made in India against such deposits may be excluded from Adjusted Net Bank Credit (“ANBC”), subject to the applicable conditions and the extent to which the underlying deposits qualify for the relevant CRR/SLR exemption.
A similar exclusion applies to advances against eligible fresh NRE term deposits of three years or more mobilised between June 19, 2026 and September 30, 2026, including eligible renewals, subject to the applicable conditions.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
