Recently, the Reserve Bank of India has eased rules for non-banking financial companies for branch expansion.
- The central bank has issued Reserve Bank of India (Non-Banking Financial Companies – Branch Authorisation) Amendment Directions, 2026.
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Key Highlights of RBI Guidelines
- General Permission: NBFCs can now open branches without prior approval in most situations while imposing certain conditions for deposit taking entities based on net owned funds.
- Objective of Reform: To provide operational flexibility to NBFCs for branch expansion to facilitate ease of doing business while ensuring necessary regulatory compliance
About Net Owned Funds (NOF)
- NOF refers to the core capital available with an NBFC for its operations.
- Significance
- It Indicates the financial strength and stability of an NBFC
- It is used by RBI for regulation, eligibility, and expansion decisions
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- RBI Approval Norm: An NBFC is generally permitted to open branches without having the need to obtain prior approval from RBI, unless otherwise specifically restricted.
- Condition for Lower NOF / Rating NBFCs:The circular further said a deposit-taking NBFC having NOF of up to Rs 50 crore or a credit rating below AA may open a branch or appoint agents within the state where its registered office is situated.
- Condition for Higher NOF / Rating NBFCs: If the NOF of such an NBFC is more than Rs 50 crore and credit rating is AA or above, then it may open a branch or appoint agents anywhere in India.
- Modifications for Core Investment Companies (CICs)
About Core Investment Companies (CICs)
- CICs are a special category of NBFCs regulated by the Reserve Bank of India.
- They primarily invest in shares and securities of group companies.
- They act as holding companies within a corporate group.
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- Revised Overseas Office Norms: The Reserve Bank of India has updated rules regarding overseas representative offices of CICs.
- Shift in Regulatory Approach: Earlier directions requiring closure of non-compliant overseas offices have been replaced with a mechanism for review or recall of approvals.
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About Non-Banking Financial Company (NBFC)
- Registered: A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 or Companies Act, 2013
- NBFCs are engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities or other marketable securities of a like nature, leasing, hire-purchase, etc., as their principal business.
- NBFCs does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
- Types: there are 8 types of NBFC ie,
- Asset Finance Company (AFC); Investment Company (IC); Loan Company (LC); Infrastructure Finance Company (IFC); Core Investment Company (CIC); Infrastructure Debt Fund- Non- Banking Financial Company (IDF-NBFC) and Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI).
- Difference Between Banks and NBFCs: The major differences between banks and NBFCs are given below,
- NBFCs cannot accept demand deposits
- NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself
- Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to depositors of deposit taking NBFCs.
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17 Apr 2026
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