RBI Issues New Basel III Directions 2025 on Perpetual Debt and Small Business Loan Regulations.

In September 2025, the Reserve Bank of India (RBI) released the ‘RBI (Basel III Capital Regulations – PDI in AT1 Capital) Directions, 2025’, raising the overseas perpetual debt limit for banks and revising Small Business Loan (SBL) norms, with effect from October 1, 2025.

      - The new regulations apply to all Scheduled Commercial Banks (SCBs) but exclude Small Finance Banks (SFBs), Payments Banks (PBs), and Regional Rural Banks (RRBs).

      - The ‘RBI (Basel III Capital Regulations – PDI in AT1 Capital) Directions, 2025’ will officially come into force on October 1, 2025.

Main Point :-   (i) Perpetual Debt Instruments (PDIs) issued in foreign currency or rupee-denominated bonds overseas are now eligible for inclusion in Additional Tier 1 (AT1) capital up to a maximum of 1.5% of Risk Weighted Assets (RWAs).

      (ii) Earlier, RBI had capped perpetual debt at 1.5% of RWAs, but less than half of this limit was permitted to be raised overseas, restricting banks’ foreign fundraising capacity.

(iii) In September 2025, RBI also released two additional guidelines — RBI (Lending Against Gold and Silver Collateral) Directions, 2025, and RBI (Interest Rate on Advances) Directions, 2025 — focusing on expanding gold loan facilities and amending SBL credit risk adjustments.
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