The Reserve Bank of India (RBI) proposed key regulatory relief for select NBFCs. The Reserve Bank Governor said that the scale-based regulatory framework for NBFCs envisages differential regulatory treatment for NBFCs that do not avail public funds and do not have any customer interface.
He clarified that, given their unique nature, a review of the regulations presently applicable to these NBFCs has been undertaken. Considering their significantly lower systemic-risk profile, it is “proposed that such Type-I NBFCs with asset size not exceeding Rs 1,000 crore, may be exempted from the registration requirement with the Reserve Bank subject to certain specified conditions.”
Lower compliance requirement for Type-1 NBFCs
According to the RBI Governor, the proposed exemption will reduce compliance requirements for these NBFCs. Accordingly, draft Amendment Directions will be issued shortly for feedback from stakeholders.
Responding to this, Deepak Shenoy, CEO of Capitalmind AMC stated that “This is huge! This basically removes the entire. 50:50 rule that prevents us from creating companies only for the purpose of investing.”
Easing branch expansion norms for NBFCs
The central bank also plans to ease branch expansion norms for NBFC-Investment and Credit Companies engaged in gold-loan business by removing the requirement of prior RBI approval for opening new branches even if they operate more than 1,000 branches.
RBI believes such NBFCs have a significantly lower systemic risk. The aimed is to ease compliance burden for smaller entities operating under limited risk conditions.
Vinay Pai, MD & Head of Fixed Income, Equirus Group welcomed the move and said, “The RBI has also dispensed with the requirement for certain NBFCs to obtain prior approval to open more than 1,000 branches. This step is expected to enhance ease of doing business and foster a more competitive environment among NBFCs, enabling them to expand their outreach more effectively.”
NBFC capital adequacy remains well above regulatory norms
The RBI Governor noted that the system-level parameters of NBFCs are also sound, characterised by an adequate capital position and improved asset quality.
Data from the Monetary Policy Statement indicated that the total Capital to Risk-Weighted Assets Ratio (CRAR) of NBFCs stood at 25.11% in September 2025. The Tier I CRAR was recorded at 23.27% during the same period, which remains well above the minimum regulatory requirements. This capital cushion supports the stability of the shadow banking sector amid changing market conditions.
The quality of assets within the NBFC sector also demonstrated a positive trend over the last year. The Gross Non-Performing Asset (GNPA) ratio improved to 2.21% in September 2025, down from 2.57% in September 2024. Similarly, the Net Non-Performing Asset (NNPA) ratio saw a decline from 1.04% in September 2024 to 0.99% in September 2025. While asset quality and capital levels improved, the Return on Assets (RoA) for the sector decreased slightly during this timeframe.