25 RBI norms interview questions for credit roles, answered

How are these RBI norms interview questions organised by level?

The RBI norms interview questions on this page run from basic scope to applied rules, and candidates at any level can use all of them.

What should candidates know about the scope of the RBI Credit Risk Management Directions?

The RBI Credit Risk Management Directions, 2025 apply only to the commercial banks defined in paragraph 3, so scope is the first thing to get right in an interview.

Q1. Which RBI direction covers credit risk management for commercial banks?

The governing text is the Reserve Bank of India (Commercial Banks – Credit Risk Management) Directions, 2025, reference DOR.CRE.REC.76/07-02-001/2025-26, dated November 28, 2025. Paragraph 2 says these Directions took effect immediately on issuance. The version used here is updated as on October 01, 2026.

Q2. Which lenders do the RBI Credit Risk Management Directions cover?

Paragraph 3 of the RBI Credit Risk Management Directions, 2025 covers banking companies other than Small Finance Banks, Payment Banks and Local Area Banks, along with corresponding new banks and State Bank of India. NBFCs are not in that definition. A candidate interviewing at any lender outside the definition should check the direction written for that lender type.

Q3. How do cash credit, overdraft, demand loans and term loans differ under RBI definitions?

Paragraph 4(1) of the RBI Credit Risk Management Directions, 2025 defines each of these facilities for commercial banks, and the main difference is how each one is drawn and repaid.

Q4. How do RBI Directions define EBID?

Earnings before Interest and Depreciation (EBID) under paragraph 4(1)(vi) of the RBI Credit Risk Management Directions, 2025 has the meaning used for computing the Debt Service Coverage Ratio (DSCR).

EBID = Profit After Tax + Depreciation + Interest on debt + Lease Rentals, if any

Do not quote a minimum DSCR from this paragraph. Paragraph 4(1)(vi) defines the term only, and DSCR limits vary by institution.

What do RBI norms say about credit appraisal?

Chapter II and Chapter III of the RBI Credit Risk Management Directions, 2025 set the policy and appraisal duties of commercial banks, and these questions come closest to daily financial appraisal work.

Q5. Can a bank rely on a consultant’s credit appraisal report?

A commercial bank cannot rely on a consultant’s credit appraisal report, because paragraph 7 of the RBI Credit Risk Management Directions, 2025 requires its own independent and objective appraisal in all cases. The bank must not depend on reports prepared by outside consultants, especially in-house consultants of the borrowing entity.

Q6. What must a bank check about promoter equity during appraisal?

Paragraph 9 of the RBI Credit Risk Management Directions, 2025 requires a commercial bank to ascertain the source and quality of equity brought in by promoters and shareholders. At appraisal, the lender must ensure that debt of a parent company is not infused as equity of a subsidiary or Special Purpose Vehicle (SPV). Paragraph 9 explains the concern: multiple leveraging, especially in infrastructure projects, camouflages ratios such as debt equity.

Paragraph 9 states the duty and does not list documents. A candidate should say how a bank evidences the check depends on its own policy.

Q7. When do RBI norms require sensitivity tests or scenario analysis?

Paragraph 8 of the RBI Credit Risk Management Directions, 2025 requires commercial banks to carry out sensitivity tests or scenario analysis, especially for infrastructure projects, including project delays and cost overruns. These tests support a view on project viability when deciding on deferment of the Date of Commencement of Commercial Operations (DCCO) or on restructuring.

Q8. What do RBI norms say about credit information reports?

Paragraph 11 of the RBI Credit Risk Management Directions, 2025 requires a commercial bank to build into its loan policies or appraisal processes suitable provisions for obtaining Credit Information Reports from one or more Credit Information Companies. The stated aim is that credit decisions rest on information available in the system.

Q9. Do RBI norms require credit assessments to consider calamities?

Credit assessments by commercial banks must consider calamities under paragraph 12A of the RBI Credit Risk Management Directions, 2025, inserted with effect from July 01, 2026. Paragraph 12A requires assessments to suitably factor in the possible impact of calamities on borrowers who may be affected.

Q10. What must a bank’s Board-approved credit risk policy cover?

Paragraph 5 of the RBI Credit Risk Management Directions, 2025, as substituted with effect from April 01, 2026, requires each commercial bank to have a comprehensive Board-approved Credit Risk Management policy. The policy must cover, among other things:

• Lending to related parties
• Country risk management
• Unhedged foreign currency exposures
• Valuation of properties, including empanelment of valuers
• Opening of current accounts and cash credit or overdraft accounts

The bank’s own limits under that policy vary by institution, so a candidate should not present one employer’s limits as an RBI rule.

What lending is prohibited or restricted for banks under RBI norms?

Chapter IV and Chapter V of the RBI Credit Risk Management Directions, 2025 restrict certain lending by commercial banks, and the related party provisions in Chapter V were inserted with effect from April 01, 2026.

Q11. Which loans are barred outright by the RBI Credit Risk Management Directions?

The RBI Credit Risk Management Directions, 2025 bar commercial banks from these three kinds of finance:

• Loans and advances on the security of the bank’s own shares (paragraph 13, under Section 20(1)(a) of the Banking Regulation Act, 1949)
• Loans to companies for buy-back of shares or securities (paragraph 23)
• Finance for setting up new units consuming or producing Ozone Depleting Substances, and financial assistance to small or medium units making aerosol units using chlorofluorocarbons (paragraph 43)

Q12. Can a bank lend to its own directors or their firms?

A commercial bank generally cannot lend to its own directors or their firms. Paragraph 14 of the RBI Credit Risk Management Directions, 2025, restating Section 20(1)(b) of the Banking Regulation Act, 1949, prohibits a commitment for loans or advances to or on behalf of:

• Any of its directors
• A firm in which a director is interested as partner, manager, employee or guarantor
• A company of which, or of whose subsidiary or holding company, a director is a director, managing agent, manager, employee or guarantor, or in which the director holds substantial interest, unless it is a subsidiary of the bank, a Section 8 company or a Government company
• An individual for whom a director is a partner or guarantor

Q13. What are the exceptions to the ban on loans to bank directors?

Paragraph 15A(2) of the RBI Credit Risk Management Directions, 2025, inserted with effect from April 01, 2026, lists six situations where the paragraph 14 ban on commercial banks does not apply:

• A facility to a company where a director has substantial interest, granted before that director’s appointment. Until the director relinquishes either directorship, the bank cannot renew it on or after maturity or renewal date, enhance it, or change its terms before maturity.
• Advances to a public trust where a trustee is also a director of the bank.
• Loans to a director against government securities, life insurance policies or fixed deposits, within 100 per cent of realisable value or any specifically prescribed loan-to-value ratio and valuation norms.
• Personal loans, other than for investing in financial assets, as permitted to employees under the approved policy or forming part of the director’s approved compensation, at a rate not lower than the employee rate.
• Non-fund-based facilities for a director or related party, fully secured by cash collateral of equivalent or higher value. Cash collateral is not mandatory for exposures from derivative transactions.
• Credit lines from settlement bankers to a qualifying central counterparty classified as a related party.

Q14. Can a bank lend to a director’s spouse or to its promoters?

A commercial bank may lend to a director’s spouse only under the conditions in paragraph 42G of the RBI Credit Risk Management Directions, 2025. The spouse must have independent income from employment or profession, the loan must follow standard creditworthiness norms, and terms must be commercial and at arm’s length. Paragraph 42G also extends the paragraph 14 ban to spouses and to minor or dependent children.

Paragraph 42H bars any exposure to the bank’s promoters and their relatives, to shareholders holding 10 per cent or more of paid-up equity, and to entities they significantly influence or control. The bar does not apply where a financial institution, scheduled commercial bank, foreign portfolio investor or mutual fund holds 10 per cent or more as a non-strategic investment without control.

Q15. What is the materiality threshold for related party loans?

The materiality threshold in paragraph 42I of the RBI Credit Risk Management Directions, 2025 is set by each commercial bank’s credit policy and cannot be higher than ceilings that depend on the bank’s asset size. Asset size is taken from the last audited balance sheet, and for loans the threshold applies at individual transaction level. The source prints the asset sizes as bare numbers under a heading that says ₹ crore, and the table below copies them as printed.

Paragraph 42K requires loans above the threshold to be sanctioned by the Board or the Committee on Lending to Related Parties. Paragraph 42I excludes interbank loans and credit facilities fully secured by cash or liquid securities under prescribed loan-to-value and valuation norms.

Q16. Who must recuse from related party loan decisions, and can a director’s debt be waived?

Paragraph 42L of the RBI Credit Risk Management Directions, 2025 requires directors, Key Managerial Personnel and specified employees of a commercial bank to recuse from deliberations and decisions on proposals involving themselves or their related parties. Recusal extends to later material changes, including one-time settlements, write-offs, waivers, enforcement of security and resolution plans.

Paragraphs 20 and 21, restating Section 20A of the Banking Regulation Act, 1949, separately cover remission. A bank needs prior RBI approval to remit, in whole or in part, a debt due from a director or from a firm, company or individual connected as those paragraphs describe. A remission made without that approval is void.

What do RBI norms say about LEI, valuation and CERSAI?

Chapter VIII, Chapter IX and Chapter X of the RBI Credit Risk Management Directions, 2025 set commercial banks’ duties on borrower identity codes, property valuation and security interest filing.

Q17. When must a borrower obtain a Legal Entity Identifier?

Paragraph 64 of the RBI Credit Risk Management Directions, 2025 requires a commercial bank to ensure that non-individual borrowers with aggregate exposure of ₹5 crore and above from banks and financial institutions obtain a Legal Entity Identifier (LEI), a 20-digit code identifying parties to financial transactions.

• Exposure includes fund-based and non-fund-based exposure, taking the higher of aggregate sanctioned limit and outstanding balance.
• The financial institutions counted include All India Financial Institutions and NBFCs, including HFCs.
• Lenders can ascertain aggregate exposure from information with them, the Central Repository of Information on Large Credits (CRILC) database, or a declaration from the borrower.
• Paragraph 65 says a borrower without an LEI gets no new exposure, renewal or enhancement. Departments and agencies of Central and State Governments are exempt, but Public Sector Undertakings registered under the Companies Act or established as a Corporation under a statute are not.
• Paragraph 68 requires the bank to ensure that borrowers renew the code as per Global Legal Entity Identifier Foundation (GLEIF) guidelines.

Q18. How many valuation reports do RBI norms require for a property?

Paragraph 70(3) of the RBI Credit Risk Management Directions, 2025 requires a commercial bank to obtain at least two independent valuation reports for properties valued at ₹50 crore or above. Paragraph 70 also requires a Board-approved valuation policy covering collateral, and professionally qualified independent valuers with no direct or indirect interest.

Q19. Which security interests must be filed with CERSAI?

Paragraphs 75 and 76 of the RBI Credit Risk Management Directions, 2025 list what is filed with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI). Paragraph 77 advises commercial banks to file charges on all current transactions on an ongoing basis.

• Securitisation and reconstruction transactions, and mortgage by deposit of title deeds (paragraph 75)
• Mortgage of immovable property other than by deposit of title deeds
• Hypothecation of plant and machinery, stocks, and debts including book debts or receivables, existing or future
• Intangible assets such as know-how, patents, copyrights, trademarks, licences and franchises
• Under-construction residential or commercial property, by an agreement or instrument other than mortgage

The last four items come from the Gazette Notification dated January 22, 2016, cited in paragraph 76. Filing covers creation, modification and satisfaction of the security interest.

What are the RBI rules on current, overdraft and collection accounts?

Chapter XIA of the RBI Credit Risk Management Directions, 2025, inserted with effect from April 01, 2026, sets out when commercial banks may maintain current, overdraft and collection accounts for borrowers.

Q20. When can a bank maintain a current account or overdraft for a borrower?

The test in paragraphs 91C and 91D of the RBI Credit Risk Management Directions, 2025 turns on banking system exposure to the customer, meaning the sum of all sanctioned fund-based and non-fund-based facilities from the banking system as Chapter XIA defines it.

If no bank or only one bank meets the 10 per cent test, the two banks with the largest exposures may maintain these accounts. Paragraph 91B places no restriction under Chapter XIA on cash credit facilities.

Q21. What is a collection account under RBI norms?

A collection account under paragraphs 91D and 91F of the RBI Credit Risk Management Directions, 2025 is a current or overdraft account used primarily to receive the account holder’s cash inflows. Funds must be remitted within two working days of receipt to the cash credit, current or overdraft account designated by the borrower. Statutory dues such as taxes, and dues to the bank maintaining the account, may be debited first.

Q22. How should term loan funds be disbursed under RBI norms?

Paragraph 91O of the RBI Credit Risk Management Directions, 2025 says term loans sanctioned by a commercial bank shall preferably be remitted directly to the intended beneficiary’s account or for the specified end use, where the beneficiary is identifiable, rather than through the borrower’s account. Note the word preferably when answering, because the paragraph does not state an absolute ban on routing through the borrower.

Q23. How often must banks monitor account eligibility, and what follows a breach?

Paragraph 91I of the RBI Credit Risk Management Directions, 2025 requires commercial banks to monitor accounts regularly, and in any case at least once every half-year. Under paragraph 91J, a bank that finds it is no longer eligible to maintain a current or overdraft account must follow two time limits:

1. Notify the customer promptly, and in any case within one month of observing the ineligibility, that the account must be converted to a collection account or closed.
2. Complete the conversion or closure within three months of observing the ineligibility.

Paragraphs 91L and 91N also prohibit use of these accounts as pass-through channels for third-party transactions, and require monitoring that flags unusually high volumes or activity inconsistent with the stated line of business. Entities licensed or authorised by a financial sector regulator to facilitate third-party transactions may do so within that authorisation.

What do RBI norms say about UFCE and large working capital borrowers?

Chapter VII and Chapter XII of the RBI Credit Risk Management Directions, 2025 add requirements for commercial banks on borrowers’ foreign currency risk and on larger working capital borrowers.

Q24. How is the UFCE provision calculated?

The Unhedged Foreign Currency Exposure (UFCE) requirement in paragraph 58 of the RBI Credit Risk Management Directions, 2025 compares a borrower’s potential currency loss with its EBID. Potential loss equals UFCE multiplied by the largest annual USD-INR volatility in the last 10 years, as published by FEDAI. EBID is taken over the last four quarters. Table 1 in paragraph 58(3) sets the incremental requirement, and the table below copies its cells as printed.

• Only financial and natural hedges count when estimating UFCE (paragraph 4(1)(xx)).
• A bank must calculate these requirements at least quarterly (paragraph 58(4)).
• Where data is insufficient, the exposure goes in the last bucket (paragraph 58(6)).
• Smaller entities, with banking system exposure of ₹50 crore or less, that cannot provide UFCE data may instead attract 10 bps under an optional alternative method (paragraphs 4(1)(xvii) and 58(7)).

Q25. What is the minimum loan component for large working capital borrowers?

Paragraph 92 of the RBI Credit Risk Management Directions, 2025 sets the minimum loan component at 60 per cent of the sanctioned fund-based working capital limit, for borrowers with aggregate fund-based working capital limits of ₹150 crore and above from the banking system.

• Export credit limits and inland sales bills limits are excluded before the limit is split.
• Drawings above the minimum loan component may be in cash credit or overdraft form.
• The split applies at individual bank level, including in consortium lending.
• The loan tenor cannot be less than seven days.
• Exclusions include intra-day facilities, Food Credit Consortium facilities, facilities to Central Counterparties and facilities from overseas branches.

Practice problems on RBI norms, made-up numbers

These practice problems apply RBI norms from the RBI Credit Risk Management Directions, 2025 to invented borrowers. All borrower and exposure figures here are made-up.

Does this borrower need an LEI? Made-up numbers

A partnership firm has the sanctioned facilities below, and each outstanding balance is below its sanctioned limit.

The firm needs an LEI. It is a non-individual borrower, its ₹5.00 crore total meets the ₹5 crore and above test in paragraph 64, and the count includes the non-fund-based guarantee and the NBFC loan.

Which banks can keep a current account? Made-up numbers

A borrower has banking system exposure of ₹40 crore, so paragraph 91D applies because exposure is ₹10 crore or more.

Bank C is the trap. Bank C misses 10 per cent on total exposure, but the test is either-or, and Bank C meets it on fund-based exposure.

What UFCE provision applies? Made-up numbers

A borrower has supplied its UFCE data. Assume a UFCE of ₹5 crore, largest annual volatility of 12 per cent, and total bank exposure of ₹10 crore. The EBID for the last four quarters is built up below.

1. Potential loss = ₹5 crore x 12 per cent = ₹0.60 crore.
2. Potential loss / EBID = 0.60 / 2.20 = 27.3 per cent, rounded.
3. The bucket is more than 15 per cent and upto 30 per cent, so incremental provisioning is 20bps with no incremental capital.
4. Incremental provision = ₹10 crore x 0.20 per cent = ₹0.02 crore, or ₹2 lakh.

How is the loan component split? Made-up numbers

A borrower has an aggregate fund-based working capital limit of ₹200 crore, which meets the ₹150 crore and above test in paragraph 92. The limit includes ₹30 crore of export credit and ₹20 crore of inland sales bills.

1. Limit to split = ₹200 crore - ₹30 crore - ₹20 crore = ₹150 crore.
2. Minimum loan component = ₹150 crore x 60 per cent = ₹90 crore.
3. Maximum cash credit or overdraft component = ₹150 crore - ₹90 crore = ₹60 crore.

How should a candidate answer RBI norms questions in a credit interview?

A candidate should answer an RBI norms question by giving the rule first, then the direction, then the lender type and date. This is general interview practice and not an RBI requirement.

1. Give the rule in one sentence. A good answer states the threshold or condition without preamble.
2. Name the direction and lender type. A good answer does not apply a commercial bank rule to an NBFC.
3. Separate shall from may and preferably. A good answer shows which parts are mandatory and which are not.
4. Apply the rule to a borrower. A good answer links it to an appraisal step, such as checking the source of promoter equity.
5. Say so if unsure. A good answer offers to check the current text, because these Directions have been amended several times in 2026.
6. Keep employer material private. A good answer never shares a current or past employer’s internal policy, limits or borrower details.

What do these 25 RBI norms questions leave out?

These 25 RBI norms questions cover only the RBI Credit Risk Management Directions, 2025 for commercial banks. They do not cover MSME-specific lending norms, or lender types outside paragraph 3.

The Directions refer to separate RBI directions for commercial banks on related topics, including:

• Income Recognition, Asset Classification and Provisioning Directions, 2025
• Prudential Norms on Capital Adequacy Directions, 2025
• Credit Facilities Directions, 2025
• Concentration Risk Management Directions, 2025
• Transfer and Distribution of Credit Risk Directions, 2025

A candidate should prepare from those texts directly for questions on those topics.