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

Banking & Finance | Dated: 02 Oct 2025

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.

🎯 Key Highlights:

  • - 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.

💡 Other Important Facts:

  • (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.

📚 Test Your Knowledge:

Which institution issued the ‘Basel III Capital Regulations – PDI in AT1 Capital’ Directions, 2025?

Correct Answer: RBI

🚀 Quick Recap:

About RBI

  • Governor : Sanjay Malhotra
  • Headquarter : Mumbai