RBI's 2025 Framework for Investment Portfolio Management by Non-Banking Financial Companies: Complete Regulatory Guidelines

The Reserve Bank of India has introduced a comprehensive regulatory framework through the Non-Banking Financial Companies – Classification, Valuation and Operation of Investment Portfolio Directions, 2025, which takes effect from November 28, 2025. This framework establishes detailed guidelines governing investment portfolio operations across various categories of NBFCs within the Scale-Based Regulatory structure.

Regulatory Framework and Scope

The newly issued Directions represent a consolidation and modernization of investment portfolio regulations applicable to non-banking financial companies. These regulations derive authority from multiple legislative provisions including Sections 45JA, 45K, 45L, and 45M of the Reserve Bank of India Act, 1934, Sections 30, 30A, 32, and 33 of the National Housing Bank Act, 1987, and Section 3 read with Section 31A and Section 6 of the Factoring Regulation Act, 2011.

Categories of NBFCs Covered Under These Directions

The regulatory framework encompasses several distinct categories of registered NBFCs:

  • NBFC-D: Deposit-accepting non-banking financial companies registered under the RBI Act, 1934
  • NBFC-ICC: Investment and Credit Companies registered under RBI Act, 1934
  • NBFC-Factor: Factoring companies registered under the Factoring Regulation Act, 2011
  • NBFC-MFI: Microfinance institutions registered under RBI Act, 1934
  • NBFC-IFC: Infrastructure Finance Companies registered under RBI Act, 1934
  • IDF-NBFC: Infrastructure Debt Fund NBFCs registered under RBI Act, 1934
  • HFC: Housing Finance Companies registered under the NHB Act, 1987
  • CICs: Core Investment Companies registered under RBI Act, 1934

Layered Regulatory Approach

The implementation follows a tiered structure aligned with the Scale-Based Regulatory framework:

Base Layer NBFCs (NBFCs-BL) are required to implement provisions outlined in Chapter II of the Directions. Meanwhile, Middle Layer NBFCs (NBFCs-ML) and Upper Layer NBFCs (NBFCs-UL) must comply with both Chapter II and Chapter III requirements, reflecting their higher systemic importance.

Entities Exempted from Application

Certain specialized categories remain outside the primary scope of these Directions:

  • Mortgage Guarantee Companies (MGC) registered under the mortgage guarantee company scheme
  • Peer-to-peer lending platforms (NBFC-P2P) registered under RBI Act, 1934
  • Account Aggregators (NBFC-AA) registered under RBI Act, 1934
  • Standalone Primary Dealers (SPD) registered under RBI Act, 1934
  • Non-Operative Financial Holding Companies (NOFHC) registered under RBI Act, 1934
  • NBFCs not accessing public funds and lacking customer interface
  • Base Layer NBFCs with customer interface but not accessing public funds

However, specific provisions related to government securities transactions, corporate bond reporting, and derivative hedging operations apply even to certain exempted categories.

Key Definitions and Terminology

The Directions establish precise definitions for critical terms:

Carrying Cost refers to the book value of assets combined with accrued but unreceived interest.

Current Investment encompasses investments readily convertible to cash and intended for holding periods not exceeding twelve months from acquisition date.

Long Term Investment includes all investments falling outside the current investment classification.

Priority distribution model adopts the meaning specified in SEBI circular SEBI/HO/AFD-1/PoD/P/CIR/2022/157 dated November 23, 2022.

Accounting Standards and Financial Reporting

Applicable Accounting Frameworks

NBFCs covered by Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015, must prepare financial statements in accordance with Ind AS notified by the Government of India. These entities must also comply with regulatory guidance provided in the Reserve Bank of India (Non-Banking Financial Companies – Financial Statements: Presentation and Disclosures) Directions, 2025.

Other NBFCs shall adhere to Accounting Standards notified under the Companies (Accounting Standards) Rules, 2021, as amended, provided these standards do not conflict with RBI Directions or Guidelines.

Board-Approved Investment Policy Requirements

Governance Framework

The Board of Directors holds primary responsibility for establishing and implementing investment policy for the NBFC. This policy must articulate clear criteria for investment classification aligned with applicable accounting standards.

Classification Protocols

At the time of making each investment, securities must be classified according to applicable accounting standards. This classification forms the foundation for subsequent valuation and reporting requirements.

Inter-Class Transfer Rules for Non-Ind AS NBFCs

For non-Ind AS compliant NBFCs, strict protocols govern transfers between investment categories:

Prohibition on Ad-Hoc Transfers: Inter-class transfers cannot occur on an arbitrary or discretionary basis without proper authorization.

Timing Requirements: Transfers may only be executed at the commencement of each half-year period, specifically on April 1 or October 1, following Board approval.

Valuation Method: Investments transfer on a scrip-wise basis at book value or market value, whichever is lower.