RBI’s 2025 Credit Facilities Directions for NBFCs: A Complete Practical Guide

The Reserve Bank of India has released a comprehensive regulatory framework titled Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025. These Directions bring together and harmonise a wide range of instructions that previously existed in a fragmented manner for different NBFC categories and business models.

The new Directions, notified vide RBI/DOR/2025-26/347, DOR.CRE.REC.266/07-01-008/2025-26 dated November 28, 2025, aim to ensure:

  • Uniform prudential norms on credit facilities
  • Stronger borrower protection standards
  • Responsible digital lending practices
  • Clear rules on Default Loss Guarantee (DLG)
  • Detailed guidance on project finance, housing finance and lending against gold/silver

They have been issued under Sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934, Sections 30A and 32 of the National Housing Bank Act, 1987, and Section 6 of the Factoring Regulation Act, 2011 and are effective immediately, unless a specific deferred date is mentioned (for instance, some gold/silver lending provisions have a later implementation date).

1. Scope and Coverage of the 2025 Directions

1.1 NBFCs to which the Directions apply in full

The Directions consolidate credit-related prescriptions for most NBFC categories. Unless otherwise excluded or partly covered, they apply across all regulatory layers (Base, Middle, Upper, Top) to the following entities:

  • NBFC-D registered under the RBI Act, 1934
  • NBFC-ICC registered under the RBI Act, 1934
  • NBFC-Factor registered under the Factoring Regulation Act, 2011
  • NBFC-MFI registered under the RBI Act, 1934
  • NBFC-IFC registered under the RBI Act, 1934
  • IDF-NBFC registered under the RBI Act, 1934
  • HFC registered under the NHB Act, 1987

The Directions are aligned with the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.

1.2 Partial applicability

Certain categories are covered only to a limited extent:

  • NBFCs-BL having customer interface but not availing public funds

    • Exempt from prudential regulations in these Directions
    • Required to comply with conduct-related provisions (customer protection, transparency, etc.)

  • CIC (Core Investment Company)

    • Only paragraphs 105, 106 and 107 of Chapter VIII apply

  • NBFC-P2P

    • Only paragraph 21(2) of Chapter III applies (relating to DLG restrictions)

1.3 Entities for which the Directions do not apply

The framework expressly excludes the following categories from its ambit:

  • MGC registered under Registration of Mortgage Guarantee Companies scheme
  • NBFC-AA registered under the RBI Act, 1934
  • SPD registered as NBFC under the RBI Act, 1934
  • NOFHC registered as NBFC under the RBI Act, 1934
  • NBFCs that neither avail public funds nor have any customer interface

NBFCs must first determine their category and regulatory layer to correctly implement the relevant chapters of the Directions.

2. Key Defined Terms Under the Directions

The Directions contain an extensive definitional section that standardises core concepts for credit facilities. Some of the more important definitions are summarised below (verbatim definitions from the Directions remain unchanged as required):

  • ‘Actual Date of Commencement of Commercial Operations (actual DCCO)’ – date when the project is put to commercial use and completion / occupancy certificate or equivalent is issued.
  • ‘Annual Percentage Rate’ (APR) – as defined in Reserve Bank of India (Non- Banking Financial Companies- Responsible Business Conduct) Directions, 2025.
  • ‘Bullet Repayment Loans’ – loans where both principal and interest fall due at maturity.
  • ‘Collateral’ – existing asset of the borrower pledged to secure a credit facility.
  • ‘Default Loss Guarantee (DLG)’ – any contractual arrangement where a third party promises to bear loan portfolio losses up to a specified percentage.
  • ‘Digital Lending’ and ‘Digital Lending Apps/Platforms (DLAs)’ – cover end-to-end or largely automated lending through digital channels that facilitate customer acquisition, assessment, disbursal, servicing and recovery.
  • ‘Lending Service Provider’ (LSP) – an agent performing one or more digital lending functions on behalf of an NBFC, subject to outsourcing norms.
  • ‘Housing Finance’, ‘Project Finance’, ‘Infrastructure Sector’, ‘Income Generating Loan’, etc. – detailed definitions govern classification and regulatory treatment of exposures.

These definitions are crucial because they determine how an exposure is treated for prudential norms, customer protection provisions, reporting, and capital requirements.

Note
Where a term is not defined in these Directions, it carries the meaning assigned under the Banking Regulation Act, 1949, RBI Act, 1934 or its accepted commercial usage.

3. Mandatory Board-Approved Credit Policies

3.1 Role of the Board

Every covered NBFC must frame a comprehensive, Board-approved credit policy, which now has to mandatorily deal with at least the following activity segments, where undertaken:

  1. Digital Lending, including all DLG-related structures
  2. Lending against gold and silver collateral
  3. Microfinance loans
  4. Project finance
  5. Demand / call loans
  6. Housing finance

The policy is expected to:

  • Prescribe internal risk limits and eligibility norms
  • Address pricing, APR, and penal charges in line with responsible conduct norms
  • Lay down documentation and monitoring standards
  • Integrate conduct requirements such as Key Fact Statements (KFS), grievance redressal and data privacy

This policy becomes the cornerstone for internal systems, product design, and operational procedures across all lending verticals.

4. Comprehensive Digital Lending Framework (Chapter III)

The 2025 Directions significantly tighten the digital lending ecosystem, particularly where NBFCs work with LSPs and use DLAs. The objective is to ensure that NBFCs retain full regulatory responsibility, while third-party platforms operate within strict guardrails.

4.1 NBFC–LSP arrangements: governance and oversight

Whenever an NBFC uses an LSP for any part of the digital lending value chain, the following are mandatory:

  • Formal written contract clearly specifying roles, rights, obligations and responsibilities of the NBFC and the LSP

  • Enhanced due diligence on LSPs before onboarding, covering:

    • Technology robustness and security
    • Data privacy arrangements and storage systems
    • Past market conduct and treatment of borrowers
    • Ability to comply with all applicable regulations

  • Periodic review of LSP’s conduct against contractual and regulatory requirements, with corrective action where deviations are found

  • Monitoring mechanisms for portfolios originated with LSP support, as laid down in the Board-approved policy

  • Clear instructions to LSPs acting as recovery agents, ensuring full conformity with Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025

  • Strict adherence to Reserve Bank of India (Non-Banking Financial Companies – Managing Risks in Outsourcing) Directions, 2025

Crucial Principle
Even when an activity is outsourced, the NBFC remains fully responsible and liable for all acts and omissions of the LSP.