Legal Updates (July 27 – Aug 01, 2026)

CASE UPDATES

The moratorium under Section 14 of the IBC is limited to the corporate debtor and cannot be automatically extended to directors, promoters, associated entities, or landowners 

The Supreme Court in the case of Tejas J. Shah vs Mantri Technology Constellations [Civil Appeal Nos.4289-4290 of 2025] dated July 27, 2026, has held that a moratorium under Section 14 of the IBC is confined to the corporate debtor alone and cannot be extended to shield other respondents who are not themselves protected by any statutory moratorium. Therefore, where a consumer complaint is pending against multiple parties, the mere commencement of CIRP against one corporate debtor does not justify freezing or indefinitely adjourning the proceedings against the remaining non-corporate-debtor respondents. Essentially, the Court has reaffirmed that the moratorium under Section 14 of the IBC is limited to the corporate debtor and cannot be automatically extended to directors, promoters, associated entities, or landowners.

The Court also laid down that an adjudicatory forum cannot refuse to proceed against non-protected parties by prematurely assuming that no liability can arise against them, especially when that very issue remains to be decided. The existence or absence of privity, maintainability, or independent obligation under the agreements are matters for adjudication on merits and cannot be used at the interlocutory stage to shut down the proceedings altogether against such respondents.  

The Court made it clear that the scope of the moratorium cannot be expanded beyond the statute. It observed that Section 14 applies only to the corporate debtor and does not automatically protect other persons or entities such as subsidiary companies, directors, managers, promoters, or personal guarantors unless the law specifically says so. Referring to earlier precedents, the Court reiterated that proceedings can continue against non-corporate-debtor parties even if the corporate debtor itself is protected by moratorium. 

Intent to deceive or proof of actual damage is not a necessary element in a passing off action, and Section 34 of the Trade Marks Act cannot be invoked by a subsequent user whose use postdates the prior user’s adoption of the mark 

The Delhi High Court in the case of TV Today Network vs Surashtra Aaj Tak [CM APPL. 80300/2025] dated July 30, 2026, has held that a disclaimer-based mandatory injunction is an inadequate and erroneous remedy when the elements of passing off are fully satisfied. The prior user of a mark can maintain a passing off action irrespective of registration status, and registration merely recognises pre-existing common law rights. The Court also emphasised that an addition of a geographical prefix to an established and distinctive mark does not dispel confusion but may reinforce the likelihood of association. Further, the intent to deceive or proof of actual damage is not a necessary element in a passing off action, and Section 34 of the Trade Marks Act cannot be invoked by a subsequent user whose use postdates the prior user’s adoption of the mark. 

On the element of goodwill and reputation, the Court relied on the earlier Delhi High Court judgment in Living Media India Limited v. Jitender V. Jain [2002 SCC OnLine Del 605], which had held that while the words ‘Aaj’ and ‘Tak’ may individually be descriptive and dictionary words, their combination enjoys protection as a trademark when subject to long, prior and continuous use by a particular party, and that any prefix or suffix would be irrelevant in a passing off action. 

On misrepresentation and likelihood of confusion, the Court observed that the respondent had incorporated the entirety of the appellant’s mark ‘Aaj Tak’ and merely prefixed a geographical identifier. The prefix ‘Saurashtra’ did not negate the association but rather reinforced it by suggesting a regional arm of the same business. The Court examined the respondent’s newspaper and Advertisement Rate Card on record, noting that the words ‘Aaj Tak’ appeared in bold and in a larger font while ‘Saurashtra’ was in a smaller font, clearly indicating an attempt to pass off on the appellant’s goodwill. 

On likelihood of damage, the Court held that actual damage need not be proved in a passing off action, a probability of damage is sufficient. The absence of an intention to deceive is not a defence to a passing off action. The Court rejected the respondent’s defence under Section 34 of the Trade Marks Act (prior user protection), holding that Section 34 applies only where the subsequent user’s use predates the use of the first-mentioned trademark. Since the appellant had been using ‘Aaj Tak’ since 2000 and the respondent commenced use only in 2002, Section 34 offered no protection to the respondent.    

A proposal involving amendment of the memorandum of association and change in capital structure falls prima facie within that reserved matters regime and cannot be tabled before the Board without such prior consent 

The Delhi High Court in the case of Resilient Innovations Private Limited (BharatPe) vs Unity Small Finance Bank Limited [O.M.P.(I) (COMM.) 293/2026] dated July 24, 2026, has held that where a shareholders’ agreement expressly provides that no “Reserved Matter” may even be taken up for discussion or approval without prior written consent of specified shareholders, a proposal involving amendment of the memorandum of association and change in capital structure falls prima facie within that reserved matters regime and cannot be tabled before the Board without such prior consent. This is especially so where the company’s own agenda note and prior correspondence expressly acknowledge that the matter is a reserved matter and seek consent accordingly. 

The Court also laid down that where the warrant terms themselves state that the shareholders’ agreement will prevail in case of conflict, the company cannot rely on the warrant mechanics or regulatory backdrop to sidestep the consent requirement under the shareholders’ agreement at the interim stage. The Court treated the prior written consent requirement as mandatory, substantive and enforceable, not procedural or dispensable.  

The Court made it clear at the outset that, since the matter was at the Section 9 interim stage, the issue was only whether BharatPe had established a prima facie case for urgent protection. The Court therefore focused on the language of the Shareholders’ Agreement, the warrant terms, and the impugned agenda note rather than undertaking a final determination on all disputed issues. 

The Court found that the warrant terms did not help the respondents at this stage. Annexure A expressly stated that if there was any conflict between the warrant terms and the Shareholders’ Agreement, the Shareholders’ Agreement would prevail. The Court therefore held prima facie that the warrant framework remained subject to the consent architecture under the Shareholders’ Agreement, including in relation to transfer and exercise-related consequences where the action involved a reserved matter such as amendment of the memorandum or change in capital structure. 

The Court then examined the impugned Agenda Item No. 18 and found that its own language undermined the respondents’ argument. The agenda itself recorded that the proposal was to increase authorised share capital, amend Clause V of the memorandum, and seek prior RBI approval. More importantly, the agenda note itself acknowledged that any amendment to the memorandum or change in capital structure was a reserved matter under the Shareholders’ Agreement, and that approval of both BharatPe and Centrum was being sought. The Court described it as “intriguing” that the respondents were now arguing before the Court that the matter was not a reserved matter, despite having themselves treated it as one in their own documents and prior correspondence. 

The Court held that the real issue was not the downstream action after approval of the resolution, but the fact that amendment of the memorandum and change in capital structure were necessary preconditions for that action. Since those preconditions themselves fell within reserved matters, prior written consent of both shareholders was mandatory. 

A difference between restaurant pricing and online platform pricing does not, by itself, establish abuse of dominance where the online model includes distinct additional services such as platform access and delivery, and where consumers voluntarily choose that convenience at disclosed additional cost 

The Competition Commission of India (CCI) in the case of R. Suresh vs Eternal Limited (Formerly Zomato Limited) [Case No. 22 of 2026] dated July 23, 2026, has held that a difference between restaurant pricing and online platform pricing does not, by itself, establish abuse of dominance where the online model includes distinct additional services such as platform access and delivery, and where consumers voluntarily choose that convenience at disclosed additional cost. The Commission also held that complaints relating to platform fee, delivery fee and similar add-on charges are essentially issues of pricing under Section 4 of the Competition Act, but in the present case the material placed on record did not disclose any prima facie abusive conduct. 

The Commission noted that the informant was essentially an end consumer aggrieved by higher pricing on the food delivery platform as compared to the restaurant, the charging of platform fee without identifiable service justification, drip pricing, and overlapping charges such as delivery fee and platform fee. It observed that although allegations were framed under both Sections 3 and 4 of the Act, the real substance of the grievance related to unfair prices and charges, which are matters that may be examined under Section 4, and therefore no further analysis under Section 3 was required. 

On the issue of higher pricing on the platform compared to the restaurant, the Commission took a prima facie view that such difference may not amount to abuse because sale through an online platform includes additional services such as platform access and delivery services, unlike direct restaurant purchase. The Commission explained that online food delivery platforms are multi-sided platforms: they charge platform fee from consumers for online food services, delivery fee for transport of food, and commission from restaurant partners for facilitating sales through the platform. It further noted that since commissions are paid by restaurants, restaurants may pass on that burden to consumers by increasing menu prices on the platform, and taxes apply in both models. 

The Commission also observed that a consumer unable or unwilling to visit the restaurant may choose the convenience of online food delivery by paying additional charges such as delivery fee and platform fee. It held that the business model of offline restaurant sale and online food delivery is different, and therefore the price of the same food product may legitimately vary across the two channels. The Commission additionally remarked that the informant had relied only on a single low-priced food item costing INR 100 to show an 88% difference, and if the food item were priced higher, the percentage difference would naturally reduce because delivery charge is generally a fixed charge and may also vary with distance.

As regards drip pricing, the Commission described it as a sales technique where only part of the total price is shown initially and additional mandatory fees such as platform fee, delivery fee, taxes or surcharges are disclosed progressively during the purchase process. However, it held that such additional charges were linked to additional services and that consumers retained the option to accept or reject the order until the final stage of placing it. On that reasoning, the Commission concluded that drip pricing, by itself, did not raise any competition issue in the facts of the case. 

Where a bank, after commencement of CIRP, debits the corporate debtor’s own cash credit account to satisfy letters of credit that were already outstanding before the insolvency commencement date, and for which the bank had already lodged its claim in CIRP, such debit amounts to recovery of pre-CIRP dues during the moratorium 

The Indore Bench of the National Company Law Tribunal (NCLT) in the case of Prawincharan Prafulcharan Dwary vs Bank of India [IA/42(MP) 2021] dated July 10, 2026, has clarified that where a bank, after commencement of CIRP, debits the corporate debtor’s own cash credit account to satisfy letters of credit that were already outstanding before the insolvency commencement date, and for which the bank had already lodged its claim in CIRP, such debit amounts to recovery of pre-CIRP dues during the moratorium and is impermissible under Section 14 of the IBC. The Tribunal further held that any approval or acquiescence by the IRP/RP cannot cure or legitimise such a prohibited recovery. 

The Tribunal confined itself only to the narrowed claim concerning the five pre-CIRP LCs. On the bank’s defence based on judgments concerning performance bank guarantees and margin money for letters of credit, the Tribunal found that the present case involved direct debit from the corporate debtor’s own cash credit account. 

The Tribunal noted that when a creditor bank applies credits received in the corporate debtor’s own account, after the insolvency commencement date, towards discharge of its own pre-CIRP dues, it amounts in substance to recovery of pre-CIRP debt during the moratorium period. The bench relied on the reasoning adopted in earlier insolvency rulings where similar recoveries from the corporate debtor’s account during CIRP were treated as impermissible preferential recovery and ordered to be reversed. It also drew a distinction between pre-CIRP LCs and LCs opened during CIRP, and accepted that this distinction was legally significant. 

A key observation of the Tribunal was that even if the erstwhile IRP had authorised or acquiesced in these debit entries to maintain business continuity, such approval could not validate a recovery that Section 14 itself prohibits. The Tribunal made it clear that neither the IRP nor the RP can legally permit one creditor to recover its own pre-CIRP dues from the assets of the corporate debtor during moratorium in a manner that gives it preference over similarly placed creditors. 

The Tribunal also rejected the bank’s objections on maintainability, non-joinder and limitation. It held that seeking reversal of wrongly appropriated amounts was part of the liquidator’s duty to protect and preserve the assets of the corporate debtor under Section 35(1)(d), and no prior approval of the Stakeholders’ Consultation Committee was shown to be mandatory for filing such proceedings. It further held that impleading the erstwhile IRP or LC beneficiaries was unnecessary because the relief sought was only against the bank in relation to entries in the corporate debtor’s own account. 

Registered money lender under the Gujarat Money Lenders Act, 2011, who arranges financing for the purpose of enabling a corporate debtor to repay an existing bank loan, does not qualify as a “financial creditor” and the amount advanced does not qualify as “financial debt” 

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) in the case of Mangaldas Finance vs Milano Papers Private Limited [C.P.(IB)/38(AHM)2026] dated July 15, 2026, has held that a registered money lender under the Gujarat Money Lenders Act, 2011, who arranges financing for the purpose of enabling a corporate debtor to repay an existing bank loan, does not qualify as a “financial creditor” and the amount advanced does not qualify as “financial debt” within the meaning of Section 5(7) and Section 5(8) of the Insolvency and Bankruptcy Code, 2016. The Tribunal emphasised that transfer of funds from the applicant’s own loan account with a cooperative bank to the corporate debtor’s Yes Bank account cannot be construed as a loan disbursement to the corporate debtor. 

A money lender regulated under a state enactment, subject to the prohibitions on mode of recovery under Section 39 of the Gujarat Money Lenders Act, 2011, is ineligible to maintain a petition under Section 7 of the IBC. The petition, appearing collusive in nature, with no properly ascertainable date of default and no compliance with the terms of the money lender’s licence, is liable to be dismissed with costs, added the Tribunal. 

The Tribunal observed that the petitioner was a money lender registered under the Gujarat Money Lenders Act, 2011, which is a state-regulated statute. The licence/registration in Form 3 was submitted for the period from Feb 20, 2024 to Feb 19, 2029. However, the applicant had not submitted any income tax filing, and had only submitted the PAN card of an individual named Asit Surendrabhai Shah. The stated loan was sanctioned to repay the corporate debtor’s outstanding loan to Yes Bank. The Tribunal held that a repayment arrangement made to enable the corporate debtor to repay its existing bank loan cannot be construed as the activity of a money lender, and the loan so granted by the applicant did not qualify as financial debt under Section 5(7) and Section 5(8) of the IBC, 2016. 

The Tribunal further observed that the applicant could not be assigned the status of a financial creditor under the provisions of the IBC, 2016, even if it had arranged the facility. The stated amount was transferred from the Social Cooperative Bank (the applicant’s loan account) to the Yes Bank account, which the Tribunal held could not be construed as a loan disbursement to the respondent corporate debtor. 

The Tribunal noted that Section 39 of the Gujarat Money Lenders Act regulates the money lender’s activity and imposes certain prohibitions regarding the mode of recovery, as also reflected in a Government of Gujarat Notification. The Tribunal concluded that the applicant was ineligible to file an application under Section 7 of the IBC, 2016, as the provisions of the IBC are for CIRP as defined in Chapter II, Section 6 and Section 7 of the IBC, and the applicant did not comply with the requirements for recovery of amount.   

Where an auction purchaser of assets of a company in liquidation applies for a fresh electricity connection after the earlier connection has already been dismantled, the electricity distribution licensee cannot insist on payment of the previous consumer’s arrears as a condition for giving supply

The Kerala High Court in the case of G. Nagendran vs Kerala State Electricity Board [W.A.NO.1718 OF 2022] dated July 28, 2026, has held that where an auction purchaser of assets of a company in liquidation applies for a fresh electricity connection after the earlier connection has already been dismantled, the electricity distribution licensee cannot insist on payment of the previous consumer’s arrears as a condition for giving supply, because the governing statutory framework requires those dues to be recovered from the earlier owner or occupier and not from the purchaser. 

The Court also laid down that a general clause creating a first charge on a consumer’s assets under Regulation 19 of the KSEB Terms and Conditions of Supply, 2005 cannot be used against a subsequent purchaser unless there exists a legally enforceable charge referable to the applicable service connection agreement. Where the old arrears arose under a pre-2005 arrangement, and the sale deed itself conveyed the assets free from encumbrances and statutory liabilities, the Board cannot recover those dues from the auction purchaser. 

The Court further clarified that once the electricity board has submitted its claim in the liquidation proceedings, it must await recovery in accordance with company liquidation law along with other creditors, and cannot sidestep that process by refusing a fresh connection to the auction purchaser until old arrears are paid. 

The Court observed that the appellant had applied for a new electricity connection, not for restoration or transfer of the old one, because the previous connection had already been dismantled. For such a case, Section 43 of the Electricity Act, Regulation 12 of the Kerala Electricity Supply Code, 2005, and Regulation 7 of the KSEB Terms and Conditions of Supply, 2005 clearly provided that arrears of the previous owner or occupier had to be recovered from that previous consumer and not from the purchaser. 

The Court further observed that the charge contemplated under Regulation 19 of the 2005 Terms and Conditions could operate only in respect of assets covered by a service connection agreement executed after those terms came into force. In the present case, the arrears related to the earlier owner whose service connection agreement had been entered into before 2005. Therefore, this was not a case where an enforceable charge existed over the assets purchased by the appellant. 

The Court also found, contrary to the view taken by the Single Judge, that KSEB had in fact participated in the liquidation proceedings and had lodged its claim before the Official Liquidator for the same arrears. Once KSEB had come into the winding up process as a creditor, it could not bypass that process and indirectly convert its unsecured claim into a preferential recovery against the auction purchaser, to the prejudice of other secured creditors entitled to claim against the sale proceeds. 

The Court gave importance to the wording of the sale deed as well. It noted that the assets were expressly conveyed to the appellant without encumbrance and without statutory liability of the vendor company. In that situation, KSEB was estopped from demanding the previous consumer’s dues from the appellant merely because he had purchased the company’s assets in auction. 

Since Open AI stores the literary works for training purposes, in a closed space without access to the public, and that data is accessible only to the LLM models themselves and is not publicly available to any human entity either for access or for download, such act does not amount to infringement under Section 51 of Copyright Act 

The Delhi High Court in the case of ANI Media vs Open AI Opco LLC [I.A. 45300/2024] dated July 24, 2026, has addressed whether the training of Large Language Models (LLMs) like ChatGPT on copyrighted news data constitutes infringement or protected “fair dealing”. The Court has held that the storage of original literary works for the sole purpose of training an LLM qualifies as fair dealing, provided the use is transformative and does not substitute the original work’s market. 

Since ANI’s alleged injury was quantifiable (as ANI itself had offered Open AI a license to all its digital media video, imagery, photographic and/or news content owned or within the control of ANI for a fee of USD 7.5 million in terms of ANI’s letter dated 3rd October 2024), the High Court held that it did not meet the threshold of “irreparable loss” required for an injunction. Further, the Court clarified that public interest serves as a vital factor, and granting an injunction would harm millions of users who benefit from AI in education, healthcare, and research. 

On the “reproduction claim”, the Court found that ANI failed to prove “substantial similarity” between its news articles and ChatGPT’s responses. It noted that ANI used “adversarial prompts”, highly specific and repeated instructions, to try and force the AI to produce verbatim extracts, yet still failed to show substantial reproduction. The Court observed that ChatGPT uses Retrieval-Augmented Generation (RAG) to pull from multiple external sources, making its output a transformative summary rather than a literal copy. 

As far as AI Training & Fair Dealing is concerned, the Court examined whether storing data for AI training is “fair dealing” under Section 52(1)(a) of the Copyright Act. It observed that such use is highly transformative and does not result in “market substitution” because ChatGPT and ANI perform fundamentally different functions. The Court highlighted that requiring licenses from every source for AI training would be economically unviable and would stifle technological progress. 

As far as “Higher Threshold” for News Articles is concerned, the Court explicitly distinguished between news articles and more creative works such as songs, noting that the “creativity involved in writing lyrics of a song would ordinarily not be present to the same extent in a news article”. Since the fundamental purpose of a news article is to report events that have actually occurred, the Court held that the threshold for establishing substantial similarity in expression is higher for news. Referring to the US Supreme Court in Feist Publications v. Rural Telephone Service [499 U.S. 340 (1991)], the High Court noted that copyright in factual compilations or news is “thin”. This means that while the specific arrangement might be protected, the underlying facts remain free for anyone to use and restate. 

To determine infringement, the Court looked at whether a reader would get an ‘unmistakable impression’ that the second work is a copy. For news, the Court looked for ‘transparent rephrasing’ or literal imitation of the “form, manner, arrangement, and expression” rather than just the shared facts. In cases of creative works like songs, identical reproduction from non-adversarial prompts was seen as evidence of ‘infringement’. In contrast, the Court found that ANI used adversarial prompts, highly specific, repeated instructions designed to ‘force’ the AI to produce verbatim extracts, and yet the AI still failed to produce a response that was ‘substantially similar’ to ANI’s original expression. 

As far as ‘Adversarial prompts’ are concerned, the Court used this expression to describe a prompt that is deliberately framed to make the model produce a specific or exact output, instead of asking a neutral question in an ordinary user manner. The Court describes such prompts as “carefully designed inputs that manipulate model outputs.” The Court treated this as important because ANI was not merely showing what ChatGPT ordinarily generated in the normal course, rather it was trying to extract a near-verbatim response through specially engineered instructions. 

In simple terms, the Court viewed adversarial prompts as stress-test prompts, not normal-use prompts. Because ANI had to push the model with commands like “tell me exactly what she said,” and because the relevant articles were not even part of the model’s training data timeline, the Court was not willing to infer that ChatGPT had memorised ANI’s articles. Instead, the Court treated ANI’s examples as insufficient to prove memorisation or regurgitation at the interim injunction stage. 

Where offence u/s 138 of the Negotiable Instruments Act had already been completed before commencement of insolvency proceedings under the IBC, later initiation of CIRP, declaration of moratorium under Section 14, or even liquidation of the company does not bar criminal prosecution against the directors or persons in charge under Sections 138 and 141 of the NI Act

The Punjab & Haryana High Court in the case of Ajay Gupta vs Can Bank Factors Limited [CRM-M-45498-2019 (O&M)] dated July 20, 2026, has held that where the offence under Section 138 of the Negotiable Instruments Act had already been completed before commencement of insolvency proceedings under the IBC, the later initiation of CIRP, declaration of moratorium under Section 14, or even liquidation of the company does not extinguish or bar criminal prosecution against the directors or persons in charge under Sections 138 and 141 of the NI Act. The moratorium protects the corporate debtor in respect of insolvency proceedings, but it does not grant immunity to natural persons from criminal liability already incurred on account of cheque dishonour. 

The Court rejected the core submission of the petitioners that the later insolvency proceedings had rendered the complaint under Section 138 not maintainable. The Court noted that the cheques were issued and dishonoured in June 2015, the statutory notice had been served, and the complaint was filed on Sep 29, 2015. Therefore, the offence under Section 138 had already stood completed much before the corporate insolvency resolution process was initiated on Sep 29, 2017. In the Court’s view, once the criminal liability had crystallised, the subsequent commencement of insolvency proceedings could not erase or obliterate it. 

Referring to the law laid down by the Supreme Court in P. Mohanraj v. Shah Brothers Ispat Pvt Ltd. [(2021) 6 SCC 258] and Ajay Kumar Radheshyam Goenka v. Tourism Finance Corporation of India Ltd. [(2023) 10 SCC 545], the Court reiterated the settled legal position that the moratorium under Section 14 of the IBC operates in favour of the corporate debtor, but the criminal liability of natural persons under Sections 138 and 141 of the NI Act continues unaffected. The Court specifically held that directors or persons in charge do not get absolved merely because insolvency resolution or liquidation proceedings have begun against the company. 

On the argument that the petitioners had ceased to control the affairs of the company after appointment of the Interim Resolution Professional and later the Liquidator, the Court found no merit. It clarified that liability under Section 141 of the NI Act has to be examined with reference to the status of the accused when the offence was committed, namely when the cheques were issued and dishonoured. The later suspension or cessation of managerial powers by operation of the IBC does not wipe out criminal liability that had already attached at the time of the offence. 

The High Court also rejected the argument that allowing the cheque dishonour prosecution to continue alongside IBC proceedings would amount to impermissible parallel proceedings. The Court observed that proceedings under Section 138 of the NI Act are predominantly criminal in nature, whereas the moratorium under the IBC is aimed at postponing civil debt enforcement. According to the Court, the moratorium is not meant to shield accused persons from criminal accountability arising from dishonour of cheques. 

The Court further held that the petitioners were seeking quashing solely on the basis of subsequent insolvency proceedings, which was not legally sustainable. Questions such as whether the petitioners were actually in charge of and responsible for the conduct of the company’s business at the relevant time, and whether all ingredients of Sections 138 and 141 of the NI Act are made out, are matters for the trial Court to decide on evidence. At the quashing stage, the High Court found no illegality or perversity in either the complaint or the summoning order. 

REGULATORY UPDATES

RBI Consolidates All Special Rupee Vostro Account Instructions into Single Circular, Says SRVA mechanism is now institutionalised channel for INR-denominated cross-border settlement 

The Reserve Bank of India (RBI), vide its circular A.P. (DIR Series) Circular No. 19 dated July 17, 2026, has consolidated and rationalised the instructions previously issued across five separate circulars governing International Trade Settlement in Indian Rupees (INR). The earlier circulars so superseded are: A.P. (DIR Series) Circular No. 10 dated July 11, 2022; Circular No. 08 dated November 17, 2023; Circular No. 11 dated June 11, 2024; A.P. (DIR Series) Circular No. 08 dated August 05, 2025; and A.P. (DIR Series) Circular No. 14 dated October 03, 2025. The instructions contained in the circular have come into force with immediate effect. AD banks are directed to bring the contents of the circular to the notice of their constituents and customers concerned. The directions have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999), and are without prejudice to any permissions or approvals required under any other law. 

Key Takeaways

• Opening of Special Rupee Vostro Accounts: Authorised Dealer (AD) banks in India may open Special Rupee Vostro Accounts (SRVAs) of their own branches outside India or of a bank resident outside India, in terms of Regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016. Notably, the opening of SRVA no longer requires a reference to the RBI for approval, as was previously the case under the earlier framework, this position was introduced vide the August 5, 2025 circular and has been carried forward into the present consolidated circular. 
• Permissible Transactions Through SRVA: The settlement of cross-border trade transactions through the SRVA is stated to be an additional arrangement for invoicing, payment, and settlement of exports and imports in INR. Beyond trade transactions, all permissible capital and current account transactions under FEMA may also be settled through the SRVA. AD banks maintaining SRVA are further permitted to open an additional current account for exporters and importers, exclusively for the settlement of export/import transactions. 
• Funding of SRVA: The SRVA may be funded by way of inward remittances or by transfer from other repatriable INR accounts, in terms of the Foreign Exchange Management (Deposit) Regulations, 2016. Additionally, proceeds accrued through permissible current and capital account transactions under FEMA can also be held in the SRVA. 
• Investment in Debt Instruments: Investments in debt instruments out of the balances held in the SRVA shall be governed by the Master Direction — Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025, as amended from time to time. This provision consolidates the earlier position introduced by the October 3, 2025 circular, which had specifically permitted investment of surplus balances in Non-Convertible Debentures (NCDs), bonds, and Commercial Papers. 
• Documentation, Reporting, and FEDAI Directory: Documentation and reporting of cross-border transactions through the SRVA shall be done in terms of the extant guidelines under FEMA, 1999, issued from time to time. A new addition in the present circular is the requirement that the details of SRVA held by overseas correspondent banks with AD banks in India may be updated periodically in the “SRVA directory” published by FEDAI. 
• Matters Not Carried Forward: Certain provisions from the earlier circulars have not been carried forward into the present consolidated circular. Specifically, the provisions relating to advance against exports, setting-off of export receivables, and bank guarantees, which were part of the original July 11, 2022 circular, are not part of the present circular. AD banks are directed to be guided by the extant instructions on these matters as amended from time to time. Additionally, the approval process for opening of SRVA, which was originally set out in the 2022 circular, was already superseded by the August 5, 2025 circular and accordingly does not find mention in the present circular.

Click here to read/ download the original notification    

RBI Amends Payments Banks Governance Directions: Board Agenda Rationalised, Calendar of Reviews Overhauled 

The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Payments Banks – Governance) Amendment Directions, 2026, bearing reference number RBI/2026-27/179 and dated July 14, 2026, amending the earlier Reserve Bank of India (Payments Banks – Governance) Directions, 2025. The Amendment Directions shall come into force from October 01, 2026. The stated objective behind the Amendment Directions is to enable bank Boards to utilise their time effectively and to facilitate a more focused and qualitative engagement on strategy and risk governance. 

Key Structural Changes to the Directions

The Amendment Directions introduce several modifications to the original Directions. Paragraph 23 of Chapter V has been deleted and reinserted, with slight modification, as a new paragraph 16A after paragraph 16. This new paragraph 16A provides that the Board shall exercise oversight on three specific matters: (i) risk management system, policy and strategy followed by the bank; (ii) exposures to related entities of the bank; and (iii) conformity with corporate governance standards, including the composition of various committees, their role and functions, periodicity of meetings, and compliance with coverage and review functions. 

Paragraph 17 of Chapter IV and paragraphs 22, 24, 25, 26, and 27 of Chapter V have been deleted in their entirety. The title of Chapter V, which was previously “Calendar of Reviews and Board Meeting Procedures,” stands amended to “Matters to be placed before the Board.” This re-titling signals a shift from a procedural calendar-based approach to a more substantive matter-based framework for Board engagement. 

New Paragraphs 27A and 27B: Categorisation of Board Matters: 

After paragraph 27, two new paragraphs have been inserted into Chapter V. Paragraph 27A provides that, notwithstanding anything contained in extant RBI circulars or directions, the requirement for matters to be placed before the Board shall be as follows: (i) policies required to be placed before the Board for approval, and those in respect of which such approval can be delegated, shall be as specified in Appendix I, with review of policies specified for Board approval being delegable to Board Committees, with the Board approving only material amendments thereto; (ii) matters other than policies that are required to be placed before the Board for approval, review, or information shall be as specified in Appendix II A; and (iii) matters other than policies that may be delegated at the discretion of the Board shall be as specified in Appendix II B. 

Paragraph 27B lays down key principles for determining the matters to be placed before the Board. The Board has ultimate responsibility for the bank’s business strategy and financial soundness, key personnel decisions, internal organisation and governance structure and practices, and risk management and compliance obligations, though it may delegate certain matters to Board Committees or Management Committees along with reporting requirements as may be necessary. 

Appendix I: Policies Requiring Board Approval: Appendix I sets out a comprehensive list of 17 categories of policies that are required to be placed before the Board for approval. These include the Investment Policy, Risk Management Policy (covering market risk, operational risk, liquidity risk/ALM, cyber security, and fraud risk management), Outsourcing Policy, Policy on Digital Banking (covering digital payment products and prepaid payment instruments), IT Policy, Responsible Business Conduct Policy, Authorisation for Banking Outlets and Other Channels, Policy on Gold Deposits or Other Liability Products, Policy on Appointment and Remuneration of Auditors, Policy on Fit and Proper Assessment of Major Shareholders, Policy on Compensation of Directors/CEO/Material Risk Takers, CSR Policy, Compliance Policy, Policy on Protected Disclosure Scheme, Code of Conduct/Ethics Policy, KYC Policy, and Policy on Interest Rate on Deposits. 

Appendix II A: Matters for Board Approval, Review, or Information: Appendix II A enumerates matters other than policies that are required to be placed before the Board. Matters requiring Board approval include acquisition of shares or voting rights, issuance of regulatory capital, reclassifications between investment categories, declaration of dividend, approval by Board of Directors in case of voluntary amalgamation, RTGS membership, appointment or reappointment of Managing Director and CEO, remuneration of Whole-Time Directors, appointment of the Chief Risk Officer, appointment of the Chief Compliance Officer, and undertaking business as Indian Agent under the Money Transfer Service Scheme. 

Appendix II B: Matters Delegable at Board’s Discretion: Appendix II B lists matters that may be delegated at the discretion of the Board to specified Board Committees. Matters eligible for delegation for approval include risk assessment methodology for Risk-Based Internal Audit, annual audit plan, operational manual for constituent subsidiary general ledger accounts, allotment of special assignments other than statutory audit, annual banking outlet expansion plan, establishing new correspondent banking relationships, and authorisation and oversight of service providers owned or controlled by Directors or key managerial personnel. 

Click here to read/ download the Original Direction   

RBI’s Second Amendment to NBFC Stressed Assets Directions Mandates Prudential Norms for NBFCs Acquiring Immovable Assets from Defaulting Borrowers, Introduces Comprehensive Framework for Disclosure of Specified Non-Financial Assets (SNFAs) 

The Reserve Bank of India (RBI), through its circular bearing reference number RBI/2026-27/189 dated July 16, 2026, has issued the Reserve Bank of India (Non-Banking Financial Companies – Resolution of Stressed Assets) Second Amendment Directions, 2026, amending the parent Directions issued in 2025 (hereinafter referred to as “the Directions”). The Amendment Directions have been issued in exercise of the powers conferred by Sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934; Sections 30A and 32 of the National Housing Bank Act, 1987; and Section 3 read with Section 31A and Section 6 of the Factoring Regulation Act, 2011, and all other laws enabling the RBI in this regard. The Amendment Directions shall come into force with effect from October 1, 2026. 

The RBI has observed that an NBFC generally does not transact in immovable assets as part of its core business operations, other than in exceptional cases where it acquires such immovable assets in satisfaction of its claims on the borrower. In order to provide clarity on the prudential treatment of such specified non-financial assets including non-banking assets (NBAs), acquired by an NBFC through various mechanisms, the RBI has decided to issue prudential norms applicable in such cases. The Amendment Directions have been finalised after examination of the feedback received on the draft Directions issued on May 5, 2026. 

Key Definitions and Policy Framework

New definition at Paragraph 10(15A) of the Directions, defining “specified non-financial asset” (SNFA) as an immovable asset acquired by an NBFC in satisfaction or part satisfaction of its claims on the borrower. A new Paragraph 16A has also been inserted, mandating that every NBFC’s policy shall incorporate suitable clauses for acquisition of an SNFA and disposal thereof. Such policy provisions shall specify, inter alia, the limit on SNFAs as a share of total assets, eligibility criteria, delegation matrix, recovery efforts to be explored before acquisition, and a maximum period for disposal not exceeding seven years. 

Prudential Norms on Specified Non-Financial Assets: A new Chapter VII-A has been inserted into the Directions, containing Paragraphs 138A through 138O, which comprehensively govern the acquisition, valuation, disposal, and disclosure of SNFAs.

Applicability and Transitional Compliance: Paragraph 138A provides that the provisions of this Chapter shall cover all SNFAs, including those acquired through bilateral acquisitions or through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. Paragraph 138B mandates that in respect of any SNFA outstanding in the books of an NBFC as on September 30, 2026 (termed “Legacy SNFAs”), compliance with these Directions shall be achieved latest by September 30, 2027. 

Conditions for Acquisition: Paragraph 138C clarifies that an SNFA shall be deemed to have been acquired only if the title of the asset is transferred in the name of the NBFC, and the NBFC is in a clear position to deal with the asset on its own. Paragraph 138D stipulates that an SNFA shall be acquired only in cases where an NBFC’s exposure to a borrower is classified as non-performing. Paragraph 138E permits an SNFA to be acquired from the borrower against full or partial extinguishment of the NBFC’s exposure on a non-recourse basis. Paragraph 138F further provides that partial extinguishment of exposure shall be treated as restructuring, and the residual exposure to the borrower shall attract the prudential treatment applicable to restructuring as contained in the Directions. 

Valuation Norms: Paragraph 138G provides that upon acquisition, an SNFA shall be recorded in the balance sheet at the lower of the net book value (NBV) of the extinguished exposure or the distress sale value (DSV) of the SNFA arrived at by at least two independent external valuers. Paragraph 138H deals with the methodology for partial extinguishment, providing that the NBV of the extinguished exposure shall be calculated on a proportionate basis, i.e., as a proportion of the share of extinguished debt. An illustrative example has been provided: if the loan outstanding as of March 31, 2026 is ₹2 lakhs with 10% specific provisions (NBV of ₹1.8 lakhs), and ₹1.5 lakhs (75%) is sought to be extinguished by acquisition of an SNFA with a DSV of ₹1.4 lakhs, then upon acquisition, the residual value of the loan on the books of the NBFC shall be reduced to ₹0.5 lakhs with associated specific provision of ₹0.05 lakhs, and the SNFA shall be valued at the lower of (DSV, NBV), where NBV shall be calculated on a proportionate basis. 

Paragraph 138I provides that at each subsequent reporting date, the SNFA shall be carried on the balance sheet at the revised NBV, which shall be the value of the extinguished exposure, net of the notional provisions applicable, had the exposure continued on the books of the NBFC. In case of partial extinguishment, the revised NBV of the SNFA shall be the extinguished fraction of the NBV of the original exposure. 

Disposal of SNFAs: Paragraph 138J mandates that an NBFC shall dispose of the SNFA within the maximum period of disposal as envisaged in the NBFC’s policy, subject to an outer maximum period of seven years. Paragraph 138K requires that an NBFC shall make all efforts to dispose of the SNFA at the earliest through a public auction, and for this purpose, the NBFC shall adhere to the principles of auction enshrined in the SARFAESI Act, 2002. Paragraph 138L prohibits the sale of an SNFA back to the borrower or its related parties, with “related parties” having the same meaning as defined in the Insolvency and Bankruptcy Code, 2016. This restriction on sale back to the borrower or its related parties shall continue to be adhered to even in cases where the SNFA has ceased to be an SNFA in terms of Paragraph 138M. Paragraph 138M provides that an SNFA put to the NBFC’s own use shall cease to be classified as an SNFA from the date of being put to use and shall be recorded under the accounting head “Fixed assets” or under any other relevant accounting head. 

Disclosure and Reporting Requirements: Paragraph 138N provides that SNFAs shall not be included in the total stock of residual exposure, Gross NPA, Net NPA, Stressed exposures, or Provisioning Coverage Ratio. The same shall be disclosed under the relevant accounting head in the balance sheet of the NBFC as “Specified Non-Financial Assets”, in accordance with the applicable regulations and accounting standards. Paragraph 138O mandates that an NBFC shall report the details of the SNFAs as per the formats provided in Annex-2, on the CIMS portal. In case of NBFC-HFCs, the details may be furnished to the National Housing Bank (NHB). 

Reporting Formats: Annex-2 prescribes two reporting tables. Table 1, titled “Stock Position of SNFAs”, requires disclosure of the total value and number of SNFAs as on the balance sheet date, broken down by age buckets of 0–3 years, 3–5 years, and 5–7 years. Table 2, titled “Movement of SNFAs”, requires disclosure of the total SNFAs at the beginning of the year, SNFAs acquired during the year, SNFAs disposed of during the year, SNFAs put to own use during the year, and the total SNFAs at the end of the year (computed as beginning balance plus acquisitions minus disposals minus assets put to own use). 

Click here to read/ download the original direction     

RBI Overhauls Credit Derivatives Regime: CDS, TRS, and Credit Index Futures Brought Under Unified 2026 Master Direction 

The Reserve Bank of India (RBI), through its Financial Markets Regulation Department, issued the Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2026, vide Notification No. FMRD.DIRD.03/14.03.004/2026-27 dated June 25, 2026. These Directions were issued in exercise of the powers conferred under Section 45W of the Reserve Bank of India Act, 1934, read with Section 45U of the Act, and in supersession of the earlier directions issued vide FMRD.DIRD.11/14.03.004/2021-22 dated February 10, 2022 and A.P. (DIR Series) Circular No. 23 dated February 10, 2022. The genesis of these Directions lies in Paragraph 13 of the Statement on Developmental and Regulatory Policies announced as part of the Bi-monthly Monetary Policy Statement for 2025-26 dated February 06, 2026, which flagged the introduction of derivatives on credit indices and total return swaps on corporate bonds. Draft directions were released for public comments on February 06, 2026, and based on the feedback received, the final Directions have been issued. These Directions come into force with immediate effect from June 25, 2026. 

The Directions are titled the Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2026, and they apply to credit derivatives transactions undertaken in both Over-the-Counter (OTC) markets and on recognised stock exchanges in India. The Directions came into force on June 25, 2026. A reference is also made to the Foreign Exchange Management Act, 1999, the Foreign Exchange Management (Debt Instruments) Regulations, 2019, and the Master Direction – Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025, dated January 7, 2025, as amended from time to time, indicating that cross-border investment considerations are woven into the regulatory framework. 

Key Definitions

A “Credit Default Swap (CDS)” is defined as a credit derivative contract in which one counterparty (the protection seller) commits to pay the other counterparty (the protection buyer) in the case of a credit event with respect to a reference entity, and in return, the protection buyer makes periodic payments (premium) to the protection seller until the maturity of the contract or the credit event, whichever is earlier. A “Total Return Swap (TRS)” is defined as a credit derivative contract under which one counterparty (the total return payer) commits to transfer the entire economic performance of a reference asset to the other counterparty (the total return receiver), and in return, receives a pre-determined fixed or floating rate linked to a benchmark. A “credit derivative” is broadly defined as a derivative contract whose value is derived from the credit risk of an underlying debt instrument or from an index of underlying debt instruments. 

A “credit event” means a pre-defined event in a credit derivative contract which triggers a settlement under the contract. “Corporate bonds and debentures” are defined as non-convertible debt instruments which create or acknowledge indebtedness, including debentures, bonds and other securities issued by a body corporate, a trust, or a statutory body, whether constituting a charge on the assets of the issuer or not, but excluding money market debt instruments, security receipts, securitised debt instruments, and bonds issued by the Central Government or a State Government. A “Future on credit indices” is defined as a standardised derivative contract, traded on a recognised stock exchange, to buy or sell an index of underlying debt instruments at a specified future date at a price determined at the time of the contract. “Hedging” is defined as the activity of undertaking a credit derivative transaction to reduce credit risk of a particular debt instrument or a portfolio of debt instruments. 

“Cash settlement” of CDS means a settlement process in which the protection seller pays the protection buyer the notional amount of the CDS contract less the expected recovery value of the reference obligation. “Physical settlement” of CDS means a settlement process in which the protection buyer delivers any of the eligible deliverable obligations to the protection seller against the receipt of the notional amount of the CDS contract. “Auction settlement” of CDS means a settlement process in which the price of the reference/deliverable obligation at which the settlement will happen is determined through an auction mechanism. 

Eligible Participants: The Directions state that the following persons shall be eligible to participate in the credit derivatives market: (a) residents; and (b) persons resident outside India, to the extent specified in the Directions. This framework thus opens the market to both domestic and foreign participants, subject to the specific conditions laid down for each category.  

Market-Makers: The Directions prescribe that the following entities shall be eligible to act as market-makers in credit derivatives: (a) Scheduled Commercial Banks, except Small Finance Banks, Payment Banks, Local Area Banks and Regional Rural Banks; (b) Standalone Primary Dealers; (c) NBFCs – Upper Layer and NBFCs – Middle Layer (including Housing Finance Companies); and (d) Export Import Bank of India, National Bank of Agriculture and Rural Development, National Housing Bank, Small Industries Development Bank of India, and National Bank for Financing Infrastructure and Development. In case an NBFC fails to meet the eligibility criteria for acting as a market-maker, it shall cease to act as a market-maker, but shall continue to meet all its obligations under existing contracts till the maturity or termination of such contracts. Critically, at least one of the parties to a credit derivative transaction shall be a market-maker or a central counterparty authorised by the Reserve Bank for the purpose. 

Click here to read/ download the original Master Direction   

RBI Amends FEMA Deposit Regulations, 2026: Expands SNRR Account Operations to IFSC, Permits NRO-to-NRE/SNRR Transfers, and Deletes Five Schedule 4 Paragraphs in Sweeping Overhaul 

The Reserve Bank of India (RBI), through its Foreign Exchange Department, Central Office, Mumbai, has issued the Foreign Exchange Management (Deposit) (Sixth Amendment) Regulations, 2026, bearing Notification No. FEMA 5(R)(6)/2026-RB dated June 18, 2026. The amendment has been made in exercise of the powers conferred by sub-section (2) of section 6 and sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and it amends the Foreign Exchange Management (Deposit) Regulations, 2016 (Notification No. FEMA 5(R)/2016-RB dated April 01, 2016), referred to as the principal regulations. These regulations shall come into force from the date of their publication in the Official Gazette. 

A key structural change introduced by the amendment is the insertion of a new definition clause in regulation 2 of the principal regulations. After clause (v), a new clause (v-a) has been inserted, which defines “International Financial Services Centre” or “IFSC” as having the same meaning as assigned to it in clause (g) of section 3 of the International Financial Services Centres Authority Act, 2019 (50 of 2019). This definitional insertion paves the way for IFSC-based operations to be brought within the scope of the deposit regulations. 

The amendment significantly expands the operational scope of Special Non-Resident Rupee Accounts (SNRR accounts). Sub-regulation (4) of regulation 5 of the principal regulations has been substituted to provide that any person resident outside India may open, hold, and maintain an SNRR account with an authorised dealer in India or its branch outside India, expressly including a branch located in an IFSC in India. The account is specified in Schedule 4 of the regulations. This substitution effectively brings IFSC branches of authorised dealers within the permitted framework for opening and maintaining SNRR accounts. 

The amendment also introduces new transfer pathways for Non-Resident Ordinary (NRO) accounts. In Schedule 1, paragraph 3, a new clause (k) has been inserted after clause (j), permitting transfer from an NRO account within the limit specified in Regulation 4 of the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. Similarly, in Schedule 3, sub-paragraph (B) of paragraph 3, a new clause (v) has been inserted after clause (iv), permitting transfer to an NRE or SNRR account within the limit specified in Regulation 4 of the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. These insertions create a regulatory pathway for moving funds from NRO accounts to NRE or SNRR accounts, subject to the remittance limits already prescribed under the Remittance of Assets Regulations. 

Schedule 4 of the principal regulations has undergone substantial restructuring. The existing paragraph 1 has been substituted with a new provision stating that a person resident outside India may open an SNRR account with an authorised dealer in India or its branch outside India, including in an IFSC in India, for the purpose of putting through permissible current and capital account transactions with a person resident in India in accordance with the rules and regulations framed under the Act, and for putting through any bona fide transaction with a person resident outside India. Additionally, the existing paragraphs 2, 5, 6, 7, and 8 of Schedule 4 have been deleted in their entirety. 

The existing paragraph 10 of Schedule 4 has been substituted to provide that transfer from an NRO account to an SNRR account shall be in accordance with Schedule 3 of the regulations. A new paragraph 16 has been inserted after paragraph 15 of Schedule 4, which provides that transactions between persons resident outside India involving SNRR accounts, which may not be subject to compliance under the Act or the Rules and Regulations framed thereunder, are to be effected by the AD bank based on instructions or mandate from the account holder that shall indicate the underlying purpose of the transfer. This provision effectively allows inter-account transactions between non-residents through SNRR accounts without requiring specific FEMA compliance, provided the AD bank receives a mandate from the account holder indicating the underlying purpose. 

The notification has been issued by N Senthil Kumar, Chief General Manager of the Reserve Bank of India. The principal regulations were originally published in the Official Gazette of Government of India – Extraordinary – Part-II, Section 3, Sub-Section (i) vide G.S.R. No. 389(E) dated April 1, 2016, and have been subsequently amended through five prior notifications, the most recent being Notification No. FEMA 5(R)(5)/2025-RB dated January 14, 2025. 

Click here to read/ download the original Regulation