The Reserve Bank of India has proposed new draft norms that would restrict most Non-Banking Financial Companies (NBFCs) to offering only s, barring them from providing revolving credit facilities. This move, if implemented, aims to enhance and curb potential risks in the lending sector.
Most
NBFCs Affected
⏳ Time Machine
How today’s news fits into the bigger picture
September 2018
IL&FS Crisis Unfolds
The default of infrastructure financier IL&FS triggered a major liquidity crisis among NBFCs, leading to increased scrutiny and tighter regulations by the RBI, highlighting systemic risks in the sector.
October 2021
Scale-Based Regulation for NBFCs
RBI introduced a four-layered regulatory structure for NBFCs, with increasing intensity of regulation based on their size and perceived risk, aiming for a more proportionate oversight. This marked a significant step in strengthening NBFC governance.
November 2024
Tighter Loan Recovery Norms
RBI mandated stricter guidelines for NBFCs regarding loan recovery agents and practices, prohibiting harassment and ensuring fair treatment of borrowers. This was aimed at improving consumer protection and ethical conduct.
March 2025
Revised NPA Classification for NBFCs
The RBI harmonized Non-Performing Asset (NPA) classification norms for NBFCs with those of banks, requiring daily stamping of accounts and ensuring clearer recognition of stressed assets, further aligning regulatory standards across financial institutions.
June 2026
RBI's Warning on Unsecured Lending
Prior to this proposal, the RBI had expressed concerns about the rapid growth of unsecured lending, including some revolving credit products, and advised financial institutions to exercise caution in these segments.
Today
RBI proposed new draft norms to restrict most NBFCs from offering revolving credit, allowing only term loans.
What happens next?
The draft norms are open for public comments, with final guidelines expected by early 2027, potentially reshaping NBFC lending models.
The Reserve Bank of India (RBI) has unveiled draft guidelines proposing a significant change for Non-Banking Financial Companies (NBFCs). Under the new proposal, most NBFCs would be restricted to offering only **term loans** and would be barred from providing **revolving credit facilities**. The only exception would be for NBFCs specifically authorized to issue credit cards. This measure seeks to bring greater discipline to the NBFC lending landscape, potentially reducing risk exposures and enhancing overall financial sector stability.
💭 If you're wondering…
A term loan is a lump sum of money lent to a borrower that must be repaid over a specified period, typically with a fixed or variable interest rate and regular installment payments. Unlike revolving credit, once repaid, the funds are not automatically available again.
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