Reserve Bank of India has amended its regulatory framework for non-banking financial companies (NBFCs), introducing a new classification system and allowing certain low-risk entities to seek deregistration if they do not handle public funds or interact with customers.
Under the revised framework, the RBI has formally introduced the concept of ‘Type I NBFCs’, defined as entities that do not accept public funds and have no customer interface. All other NBFCs will be categorised as ‘Type II NBFCs’.
The regulator has also clarified that indirect receipt of public funds—through group entities or associates—will be treated as public funds, tightening oversight on fund flows.
A key feature of the amendment is the exemption from registration requirements for NBFCs that meet specific criteria. Entities with asset sizes below ₹1,000 crore, which neither accept public funds nor have customer interaction, can seek deregistration from the RBI.
Eligible NBFCs, including those currently registered, can apply for deregistration within six months—by 31 December 2026—provided they meet the prescribed conditions.
To qualify, such NBFCs must demonstrate that operating without public funds and customer interface is part of their long-term business model. They are also required to pass annual board resolutions confirming the same and disclose their status in financial statements, the central bank says.
Applications for deregistration must be submitted through the RBI’s PRAVAAH portal, along with audited financials, auditor certification, and board undertakings.
Despite the exemption, RBI has made it clear that these ‘unregistered Type I NBFCs’ will continue to be subject to certain provisions of the RBI Act and can face regulatory action in case of violations.
Statutory auditors will be required to report any breaches related to public funds or customer interface, ensuring continued supervisory oversight.
NBFCs with asset sizes of ₹1,000 crore or more will be required to register as ‘Type I NBFCs’ even if they do not deal with public funds or customers. Additionally, if multiple such entities exist within a group, their asset sizes will be aggregated to determine regulatory requirements.
RBI has clarified that unregistered NBFCs seeking to undertake overseas investments in the financial sector must obtain registration and prior approval. Such entities will also be barred from investing in non-financial overseas sectors.
Consequent to these changes, RBI has amended multiple existing NBFC-related directions, replacing earlier references to such entities with the new ‘Type I NBFC’ classification across prudential, credit risk, asset liability management and disclosure norms.
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