Essential Guide to NBFC Deposits: RBI FAQs Explained for Investors and Businesses (Updated 2026)

The Reserve Bank of India’s updated FAQs on Non-Banking Financial Companies (NBFCs), as on February 10, 2026, lay down a detailed regulatory blueprint for how these entities are defined, regulated, and allowed to mobilise funds from the public. This restructured guide distills those FAQs into a practical, user‑oriented explanation, focusing especially on acceptance of deposits, investor protection, and enforcement mechanisms.

NBFCs play a crucial role in India’s financial ecosystem by extending credit, making investments, and supporting specialised sectors such as housing, infrastructure, and microfinance. At the same time, they operate under a regulatory framework that is distinct from banks. Understanding this difference is essential for both assessee‑investors and businesses interacting with NBFCs.

1. Core Understanding: What is an NBFC and When Is It Regulated by RBI?

1.1 Meaning of a Non-Banking Financial Company (NBFC)

An NBFC is an incorporated company under the Companies Act, 1956 or Companies Act, 2013, whose primary line of business involves financial activities such as:

  • Granting loans and advances
  • Investing in shares, stocks, bonds, debentures, and securities issued by Government, local authorities or similar marketable securities
  • Engaging in leasing or hire-purchase operations
  • Carrying on other financial business similar in nature

However, entities whose main business is any of the following are excluded from the NBFC definition:

  • Agricultural activities
  • Industrial undertakings
  • Trading of goods (other than securities)
  • Provision of services (other than specified financial services)
  • Activities relating to sale, purchase or construction of immovable property

1.2 “Principal Business” and the 50-50 Test

The RBI evaluates whether a company is “principally” engaged in financial activity using a quantitative test commonly known as the 50-50 test. A company is treated as engaged in financial business if:

  • Financial assets exceed 50% of total assets (after excluding intangible assets); and
  • Income from financial assets exceeds 50% of gross income.

A company meeting both thresholds must register as an NBFC with RBI. This concept of “principal business” is not defined in the Reserve Bank of India Act, 1934, but has been clarified through an RBI press release (Press Release 1998-99/1269 dated April 08, 1999) to prevent non‑financial companies with incidental financial activities from being brought under RBI supervision unnecessarily.

Thus, for instance, a company primarily engaged in manufacturing, real estate development or trading, but earning a small fraction of income from loans or investments, will not be treated as an NBFC and will not fall under RBI’s NBFC regulatory fold.

1.3 How NBFCs Differ from Banks

Though NBFCs and banks both lend and invest, NBFCs are not banks and face key limitations:

  • They cannot accept demand deposits (e.g., current or savings accounts withdrawable on demand).
  • They are outside the payment and settlement system, and therefore cannot issue cheques drawn on themselves.
  • Deposits placed with deposit‑taking NBFCs do not enjoy insurance coverage from Deposit Insurance and Credit Guarantee Corporation (DICGC).

NBFCs are therefore credit and investment intermediaries but not full‑service banking entities.

1.4 Mandatory RBI Registration and Net Owned Fund (NOF)

Under Section 45-IA of the RBI Act, 1934, no company is permitted to start or carry on the business of a non‑banking financial institution without:

  1. A valid Certificate of Registration (CoR) from RBI; and
  2. A minimum Net Owned Fund (NOF) of ₹10 crore (effective October 01, 2022).
  • New NBFC applicants must meet the ₹10 crore NOF from inception.
  • Existing NBFCs have time up to March 31, 2027 to scale up NOF to ₹10 crore.

Certain entities, depending on their primary regulator (e.g., SEBI, IRDAI, Government authorities), are exempt from RBI registration to avoid “dual regulation”. These include:

  • SEBI-registered Alternative Investment Funds, Merchant Bankers, Stock Brokers
  • IRDAI-registered insurance companies
  • Nidhi companies
  • Chit companies under the Chit Funds Act, 1982
  • Stock exchanges, mutual benefit companies, etc.

The exemption and regulatory framework are codified in the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.

1.5 Conditions for NBFC Registration

A company seeking NBFC registration must:

  • Be a company incorporated under Section 3 of the Companies Act, 1956 or corresponding provision of the Companies Act, 2013.
  • Maintain the minimum NOF of ₹10 crore (with higher thresholds prescribed for specific NBFC categories, such as NBFC-IFC, IDF-NBFC, MGC, HFC, SPDs, NBFC-AA, NBFC-P2P).
  • Submit the prescribed application and documents through RBI’s PRAVAAH portal, as per RBI’s Press Release 2015-2016/2935 dated June 17, 2016.

2. Categories of NBFCs and RBI’s Regulatory Powers

2.1 Classification of NBFCs

NBFCs are categorised in three main ways:

  1. By liability profile

    • Deposit-accepting NBFCs
    • Non-deposit-accepting NBFCs

  2. By regulatory layer under Scale Based Regulation

    • NBFC-Base Layer
    • NBFC-Middle Layer
    • NBFC-Upper Layer
    • NBFC-Top Layer

  3. By business activity, such as:

    • Investment and Credit Company (ICC)
    • Housing Finance Company (HFC)
    • Infrastructure Finance Company (IFC)
    • Infrastructure Debt Fund (IDF-NBFC)
    • Core Investment Company (CIC)
    • Micro Finance Institution (NBFC-MFI)
    • NBFC-Factor
    • Mortgage Guarantee Company (MGC)
    • Standalone Primary Dealer (SPD)
    • Non-Operative Financial Holding Company (NOFHC)
    • NBFC – Account Aggregator (NBFC-AA)
    • NBFC – Peer to Peer Lending Platform (NBFC-P2P)

Each category has specific regulatory conditions relating to asset composition, minimum capital, permitted activities, and risk management.

2.2 RBI’s Supervisory and Enforcement Powers

For any company that satisfies the principal business / 50-50 test, RBI may:

  • Register and set eligibility conditions
  • Frame policies and issue Directions
  • Conduct inspections and off‑site surveillance
  • Impose prudential norms and conduct regulations
  • Initiate penal action for violation of the RBI Act, 1934 or RBI’s Directions, including cancellation of CoR.

Companies falsely claiming to be RBI‑regulated or soliciting deposits under the guise of RBI oversight are liable to legal action. RBI and the Police can be informed to initiate proceedings.

Where a company conducts lending, investment, or deposit‑taking as its principal business without NBFC registration (despite being required to obtain CoR), it is in direct contravention of the RBI Act, 1934, attracting penalties, fines, and even prosecution.

3.