RBI Updates NBFC Framework; Exempts Small Entities from Registration Requirement

The Reserve Bank of India has eased registration rules for a set of Non-Banking Financial Companies (NBFCs), as per news reports.  

Entities with assets below ₹1,000 crore will not need to register, provided they do not use public funds and have no direct dealings with customers. The revised norms will come into effect from 1 July 2026. 

Who the Exemption Covers 

The exemption applies to non-deposit-taking NBFCs that operate without raising money from the public. These entities also should not have any customer interface.  

As part of the change, such firms will not be required to follow provisions under Sections 45IA and 45IC of the RBI Act, 1934, including maintaining a reserve fund. 

Shift from Earlier Rules 

Earlier, companies were required to register as NBFCs if over 50% of their total assets were financial in nature, including investments like mutual funds. The new framework removes this condition for entities that meet the exemption criteria.  

This is expected to cover smaller setups such as family offices managing their own funds. 

Window for Existing NBFCs 

Existing NBFCs that meet the revised conditions, including those classified as ‘Type I NBFCs’, can apply to surrender their registration.  

The RBI has set a deadline of 31 December 2026 for such applications, giving a 6-month period from the date the rules take effect. 

Part of Regulatory Changes 

The update is part of the ‘Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026’. These changes follow draft proposals issued in February for stakeholder feedback. 

Separately, the RBI has also allowed banks to provide relief in areas affected by natural calamities, including fee waivers or reductions for up to one year. 

Read More: SEBI Operationalises PaRRVA for Verified Performance Disclosure; To Go Live from May 4! 

Conclusion 

The revised norms reduce compliance requirements for smaller NBFCs that operate without public exposure, while retaining oversight over entities that raise funds or deal directly with customers. 

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