RBI Repeals Market Mechanism Framework for Large Borrowers

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  • Last Updated on 8 December, 2025

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RBI Market Mechanism Framework Repeal

Press Release: 2025-2026/1629, Dated: 04.12.2025

1. Introduction

The Reserve Bank of India (RBI) has issued fresh Amendment Directions formally repealing the ‘Market Mechanism Framework’ (MMF) that earlier governed credit discipline for large borrowers. This decision marks a significant regulatory shift in the approach to monitoring large corporate exposures and ensuring timely repayment discipline within the financial system.

2. Background of the Market Mechanism Framework

The MMF was introduced to strengthen credit culture by requiring large borrowers to maintain specific credit discipline parameters and adhere to timelines set by lenders. It also mandated banks and financial institutions to share information on borrower behaviour and classify deviations. However, over time, RBI observed overlaps with other prudential norms and stressed asset frameworks, prompting the need for simplification.

3. Key Changes Under the Amendment Directions

With the repeal of the MMF, the requirements for borrower reporting, deviation classification, and lender information-sharing under the framework now stand withdrawn. RBI’s Amendment Directions consolidate regulatory provisions and eliminate duplicate compliance burdens. The central bank aims to streamline supervision and align monitoring mechanisms with updated prudential and resolution frameworks already in place.

4. Impact on Borrowers and Lending Institutions

The repeal is expected to ease compliance requirements for large borrowers, as reporting obligations under the earlier framework become redundant. For banks and NBFCs, this move simplifies monitoring processes by removing dual-layer reporting and classification systems. Instead, lenders will continue relying on updated asset quality norms, early warning systems, and the revised framework for stressed assets to assess borrower behaviour and credit risk.

5. Conclusion

By issuing these Amendment Directions and repealing the Market Mechanism Framework, RBI has taken a decisive step toward simplifying regulatory oversight and minimising procedural overlap. The updated approach ensures that monitoring of large borrowers remains efficient while aligning credit discipline with modernised supervisory tools. Stakeholders now await detailed operational guidelines from RBI to understand the full implementation impact.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied