UPI rules to loan guidelines: New banking regulations effective April 1, 2025

The Reserve Bank of India (RBI) has introduced a series of new banking regulations that will take effect on April 1, 2025, aiming to enhance financial inclusivity and security. A significant update involves the Priority Sector Lending (PSL) guidelines, which now include increased limits for education, renewable energy, and affordable housing loans. 

This move is intended to boost credit flow to critical sectors, fostering inclusive growth. Additionally, the risk weights on bank loans to Non-Banking Financial Companies (NBFCs) have been adjusted from 125% to 100%, providing much-needed relief to the sector, which has been grappling with elevated borrowing costs. 

In a bid to improve transaction security and reduce fraudulent activities, the National Payments Corporation of India (NPCI) has mandated new guidelines for the Unified Payments Interface (UPI). Effective from April 1, 2025, all banks and Payment Service Provider (PSP) apps must update mobile number records on a weekly basis. Furthermore, UPI users are now required to give explicit consent for the seeding of their numbers, ensuring that users are more aware and in control of their transaction details. 

Urban Cooperative Banks will experience a shift in regulatory oversight as they are now subject to the Prompt Corrective Action (PCA) Framework, replacing the current Supervisory Action Framework. This change, effective April 1, aims to tackle financial stress within these banks through a principle-based approach with fewer parameters. Criteria for invoking the PCA include consecutive annual losses, net Non-Performing Assets (NPAs) above 6% but below 9%, and a Capital Adequacy Ratio that falls up to 250 basis points below required levels.

The RBI also announced changes affecting microfinance institutions (MFIs). Under revised guidelines from the RBI-recognised Self-Regulatory Organisation (SRO) for microfinance companies, MFIN, borrowers can no longer have loans from more than four lenders at one time. These guidelines, effective April 1, are designed to prevent over-indebtedness and ensure more responsible lending practices. 

Meanwhile, a separate change affecting ATM users will come into force on May 1, 2025, when banks will be allowed to increase the maximum fee for ATM cash withdrawals to Rs 23, up from the previous Rs 21, reflecting rising operational costs.

While these changes are poised to enhance the overall resilience and transparency of the Indian banking sector, they also align with broader economic objectives such as boosting financial inclusion and safeguarding consumer interests. Stakeholders in the banking and financial services industry are urged to adopt these guidelines promptly to remain compliant and to continue fostering trust and reliability within the financial ecosystem.