RBI’s Draft NBFC Amendment Directions, 2026 – Complete Overview of New Regime

The Reserve Bank of India has, on 10 February 2026, released the draft “Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026”. These draft directions overhaul how Non-Banking Financial Companies (NBFCs) are identified, categorised and brought under the registration net.

The proposed framework tightens the link between regulatory oversight and the nature, size and risk profile of NBFCs. It also introduces a clear pathway for certain low-risk entities to exit the NBFC registration regime, while simultaneously closing gaps that were earlier used for regulatory arbitrage.

1. Shift to a Functional Two-Tier NBFC Classification

Type I vs Type II NBFCs

The draft directions replace the earlier approach with a functional, activity-based classification:

  • Type I NBFC

    • Operates solely on its own funds (no public funds in any form).
    • No customer interface – does not deal with customers in a lending or financial services capacity.
    • Essentially, these are captive or in-house entities, like treasury or investment arms, that do not operate as financial intermediaries for the public.

  • Type II NBFC

    • Covers all other NBFCs that do not satisfy Type I criteria.
    • Includes entities that either:
      • Access funds from outside sources (including related parties), or
      • Have any form of customer-facing financial activity.

This bifurcation is meant to differentiate pure balance sheet investment / treasury entities from NBFCs acting as intermediaries in the financial system with public exposure.

Note: The classification is not merely nomenclature. It drives whether registration is required, the nature of compliance obligations and the level of regulatory scrutiny.

2. When Type I NBFCs Can Avoid RBI Registration

Conditions for Registration Exemption

The RBI has proposed that certain Type I NBFCs may be exempt from mandatory registration under Section 45IA of the RBI Act, 1934 if all of the following conditions are simultaneously satisfied:

  1. No public funds at all

    • The entity does not raise, directly or indirectly, any public funds.
    • This includes avoiding deposits, external borrowings, group funding sourced from public money, or any other outside liabilities termed as public funds.

  2. No customer interface or commercial lending

    • The NBFC does not engage with customers in any capacity involving:
      • Lending,
      • Guarantees,
      • Distribution of financial products, or
      • Any other financial intermediation.

  3. Asset size below ₹1,000 crore

    • Total assets must be less than ₹1,000 crore.
    • Crossing this limit turns registration into a mandatory requirement (discussed later).

  4. Annual Board Resolution

    • Every financial year, the Board must pass a resolution confirming that the entity continues to meet all eligibility criteria for exemption.

  5. Clear disclosure in Notes to Accounts

    • The financial statements must include a note explicitly stating that:
      • The entity is availing exemption from registration as an NBFC, and
      • It continues to satisfy the prescribed conditions.

Entities that meet all the above requirements will enjoy regulatory relief from NBFC registration, though they will not be completely outside RBI’s regulatory domain (as discussed in a later section).

Who Benefits from This Relaxation?

The design of this exemption primarily benefits:

  • Holding companies with passive investments.
  • Corporate treasury centres that manage intra-group funds without commercial lending.
  • Captive finance platforms that do not access public money and do not deal with external customers.

These entities, although technically falling within the broad NBFC definition earlier, will gain clarity and reduced compliance burden, provided they remain small (below ₹1,000 crore) and insulated from public funding and customer-facing activities.

3. The ₹1,000 Crore Asset Size – Critical Trigger for Registration

The draft directions make ₹1,000 crore total asset size a central threshold:

  • Type I NBFCs with assets below ₹1,000 crore

    • Eligible for exemption from registration, provided all other conditions are met.

  • Type I NBFCs with assets of ₹1,000 crore or more

    • Registration becomes compulsory under Section 45IA.
    • Even if such entities operate solely on owned funds and have no customer interface, the size itself pulls them into the registered NBFC universe.

This is aligned with RBI’s Scale Based Regulation (SBR) framework, where: