RBI Issues NBFC Regulatory Amendment Directions, 2026
RBI Issues NBFC Regulatory Amendment Directions, 2026: Key Changes Explained
The Reserve Bank of India (RBI) has introduced the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026. These revised rules update the existing 2025 framework and mainly focus on NBFCs that neither raise public funds nor interact directly with customers.
The new provisions will come into effect from 1 July 2026.
Main Objective of the Amendment: The updated framework aims to simplify compliance for certain low-risk NBFCs while strengthening regulatory clarity. It introduces a fresh classification system and defines exemption rules for companies operating without public funding and without customer-facing activities.
New NBFC Categories Introduced
1. Type I NBFC
A Type I NBFC refers to an NBFC that:
- does not raise public funds,
- has no customer interface, and
- holds a Certificate of Registration issued by RBI.
2. Type II NBFC
A Type II NBFC refers to all other RBI-registered NBFCs that do not fall under the Type I category.
3. Unregistered Type I NBFC
This category applies to eligible NBFCs that:
- do not raise public funds,
- have no customer interaction,
- maintain assets below ₹1,000 crore, and
- qualify for exemption from registration requirements.
Major Relief for Small NBFCs: NBFCs meeting the above conditions and having an asset size below ₹1,000 crore may seek exemption from certain registration provisions under the RBI Act.
Existing eligible NBFCs can apply for deregistration with RBI by 31 December 2026.
Conditions for Exemption: To qualify as an Unregistered Type I NBFC, a company must:
- avoid public funds as a long-term business model,
- avoid customer-facing operations,
- maintain assets below ₹1,000 crore,
- pass an annual board resolution confirming compliance, and
- disclose its exempt status in financial statement notes.
Application Process: Requests for deregistration or registration must be submitted through RBI’s PRAVAAH portal along with supporting documents such as:
- audited financial statements,
- board resolutions,
- auditor certificates, and
- declarations regarding public funds and customer interface.
Important Compliance Note: Even exempt NBFCs will continue to remain under applicable provisions of the RBI Act. RBI also retains authority to inspect, regulate, and penalize such entities if violations occur.
Overseas Investment Restriction: Unregistered Type I NBFCs planning overseas investment in financial services must first obtain RBI registration and approval. Investment in overseas non-financial businesses is not permitted under this exemption.
Wider Impact on Other RBI Directions: RBI has also aligned several other NBFC regulations issued in 2025 by replacing earlier references with the new Type I NBFC terminology.
Effective Date: All amendments become operational from 1 July 2026.
Conclusion: The 2026 amendment creates a more structured compliance regime for NBFCs by separating low-risk entities from customer-facing finance companies. Small NBFCs with limited operations may benefit from reduced regulatory burden, while RBI continues to maintain oversight over systemic risks.
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