NBFC Regulatory Framework: Key RBI Amendments in 2026

Overview

The Reserve Bank of India issued a comprehensive revision to its Master Directions for Non-Banking Financial Companies in 2025, consolidating several earlier circulars and introducing fresh obligations across governance, liquidity risk management, and internal audit. Every NBFC — regardless of tier — must review these directions against their existing framework and close compliance gaps before the applicable deadlines.

Key Changes at a Glance

1. Scale-Based Regulation (SBR) Updates

RBI has fine-tuned the thresholds for Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL), and Top Layer (NBFC-TL) classification. Companies that have crossed the asset size or interconnectedness criteria for a higher tier must notify RBI and implement the corresponding governance requirements within 90 days of reclassification.

2. Governance and Board Composition

Upper Layer and Top Layer NBFCs are now required to:

• Appoint an independent Chief Compliance Officer (CCO) reporting directly to the Board
• Constitute a Risk Management Committee with at least one independent director
• Ensure the Board approves a written risk appetite statement annually
• Maintain a Board-approved succession plan for Key Management Personnel

3. Liquidity Risk Management

All NBFC-MDs and NBFC-ICs with asset size above ₹100 crore must:

• Compute and monitor the Liquidity Coverage Ratio (LCR) on a daily basis
• File monthly ALM returns in the revised format
• Maintain a Contingency Funding Plan approved by the Board

4. Customer Protection and Fair Practices

The Fair Practices Code has been substantially revised to align with the Digital Lending Guidelines. Notable additions include:

• Mandatory Key Fact Statement (KFS) for all retail and MSME loans
• Interest calculation basis must be disclosed in simple annualised terms
• Penal charges must be disclosed separately from penal interest

5. Internal Audit and Concurrent Audit

NBFCs in the Middle Layer and above must ensure their internal audit function reports to the Audit Committee, with independent access to the Board, and that audit findings are resolved within the timelines stipulated in the revised framework.

Action Points for Compliance Teams

1. Map your current NBFC category and reassess against the latest SBR thresholds.
2. Review Board composition against the fit-and-proper criteria and independence requirements.
3. Update the loan origination system to generate compliant Key Fact Statements.
4. Revise the ALM policy and liquidity monitoring MIS.
5. Schedule a Board workshop on the updated governance expectations.

Latest RBI Master Directions for NBFCs

RBI revises and consolidates its Master Directions from time to time, and the versions published on the RBI website are the authoritative and most current source. Before acting on any point discussed above, verify the latest text of the Master Direction applicable to your NBFC category:

RBI Master Directions — Reserve Bank of India

Compliance teams should check this page periodically, as amendments are notified there ahead of wider circulation.

Conclusion

The 2025 amendments signal RBI's intent to bring NBFC governance standards progressively closer to those applicable to banks. Early and proactive compliance is not just a regulatory obligation — it is a competitive differentiator that builds lender, investor, and customer confidence.

For a detailed compliance gap analysis specific to your NBFC, contact CorpGovernAdvisor.