RBI Scraps Prior Approval for Gold-Loan NBFC Branch Expansion

The Reserve Bank of India has eased branch expansion norms for certain non-banking financial companies, a move expected to improve operational flexibility for lenders focused on gold-backed loans, as per news reports. 

Branch Expansion Norms Eased for Gold Loan NBFCs 

The Reserve Bank of India said non-banking financial companies offering loans against gold will no longer need prior approval to open new branches.  

The change applies to investment and credit companies engaged in gold lending that earlier required RBI clearance once their branch count exceeded 1,000. 

Explaining the decision, the RBI said there was a need to provide operational flexibility for branch expansion while ensuring compliance.  

It added that, given the existing prudential and governance framework for NBFC-ICCs, the requirement for prior approval has been dispensed with as part of the latest credit policy review. 

Companies Likely to Benefit and Industry Response 

NBFCs such as Bajaj Finance, Muthoot Finance, Cholamandalam Investment and Finance Company, Mahindra & Mahindra Financial Services, Shriram Finance and Tata Capital Financial Services are expected to benefit from the revised norms. 

Shriram Finance executive vice chairman Umesh Revankar said removing the approval requirement would allow management teams to focus more on credit delivery and risk management rather than regulatory processes. 

Overseas Offices and Deposit Taking NBFC Rules 

The central bank clarified that NBFCs and housing finance companies will still need prior approval to open representative offices abroad.  

Such offices can only undertake liaison work, market studies and research, and are not permitted to offer loans or deploy funds. Parent NBFCs must submit periodic reports, failing which the RBI may advise winding up the overseas office. 

Separately, deposit-taking NBFCs, including HFCs, with net-owned funds above ₹50 crore and an AA credit rating can open branches or appoint agents anywhere in India. Smaller deposit-taking NBFCs with lower ratings are restricted to operating within the state of their registered office. 

Read More: RBI Eases NBFC Norms for Smaller Shadow Banks! 

Conclusion 

The regulatory changes are aimed at easing domestic expansion for well-governed NBFCs while retaining controls on overseas activity and deposit-taking institutions, according to the RBI. 

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