RBI Revises Credit Facilities Directions for NBFCs: Alignment with IRACP Norms
The Reserve Bank of India has issued the Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Amendment Directions, 2026 on February 13, 2026, bringing a focused but important change for Non-Banking Financial Companies (NBFCs). This amendment primarily aligns the existing Credit Facilities Directions, 2025 with the latest framework on Income Recognition, Asset Classification and Provisioning (IRACP) issued for NBFCs.
While the textual amendment is concise, it has meaningful implications for how NBFCs classify their loan assets and compute provisioning going forward. This write-up explains the regulatory background, the exact nature of the amendment, and its practical impact on NBFCs’ credit operations and compliance systems.
Regulatory Background and Context
RBI’s powers under Chapter III B of the Reserve Bank of India Act, 1934
The amendment has been issued by the RBI in exercise of its authority under Chapter III B of the Reserve Bank of India Act, 1934, which empowers the central bank to regulate and supervise NBFCs in the public interest. This chapter provides the legal foundation for RBI to:
- Frame prudential norms for NBFCs
- Issue directions on credit, provisioning, and asset classification
- Modify or update earlier directions to keep them in line with evolving regulatory policy
The RBI has specifically stated that it is “satisfied that it is necessary and expedient in the public interest” to issue these Amendment Directions, thereby reinforcing that the change is part of a broader prudential regulation strategy.
Linkage with IRACP Amendment Directions, 2026
Prior to this amendment, the RBI had already notified the Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026. Those IRACP amendments refined and updated the prudential norms governing:
- When and how income on loan assets is to be recognized
- Classification of loan accounts (e.g., standard, sub-standard, doubtful, loss)
- Minimum provisioning requirements linked to such classification
Once those norms were updated, it became essential to ensure that the Credit Facilities Directions, 2025 did not create overlap, inconsistency, or ambiguity. The Credit Facilities Amendment Directions, 2026 are therefore consequential in nature, meant to harmonize the asset classification and provisioning references under the Credit Facilities framework with the IRACP Directions, 2025.
Scope and Coverage of the Amendment
Directions being modified
The present amendment modifies the Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025, referred to in the notification simply as “the Directions”. These Directions broadly govern:
- Sanctioning and structuring of credit facilities by NBFCs
- General prudential requirements linked to credit exposures
- Operational conditions around disbursal and management of loans
Within these Directions, paragraph 25(1) has now been substituted by a new provision that directly cross-refers to the IRACP framework.
Exact substituted provision – Para 25(1)
The RBI has replaced paragraph 25(1) with the following:
25. (1) Asset classification of individual loan assets and consequent provisioning requirement shall be in terms of the Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025.
This means all NBFCs must look to the Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025 for:
- The correct asset classification status of each individual loan asset
- The corresponding provisioning requirement associated with such classification
No parallel or conflicting framework under the Credit Facilities Directions, 2025 will govern these two aspects anymore.