Unregistered Non-Banking Financial Companies (NBFCs)

Summary : The Reserve Bank of India (RBI) issued amendment directions on 29 April 2026, effective from 1 July 2026, revising the regulatory framework for certain Non-Banking Financial Companies (NBFCs). Under Section 45-I(f) of the RBI Act, an NBFC is generally identified based on the “principal business criteria,” requiring financial assets and income from financial assets to each exceed 50% of the total. The amendments introduce the category of “Unregistered Type 1 NBFCs” for eligible entities with asset size below ₹1,000 crore, no public funds, and no customer interface. Such entities operate only with internal or group funds and do not provide loans or services directly or indirectly to public customers. These NBFCs are exempt from registration under Section 45-IA and reserve fund requirements under Section 45-IC, though RBI retains supervisory and penal powers. Existing eligible NBFCs may seek deregistration through the PRAVAAH portal by 31 December 2026.

Section 45-I(f) of the Reserve Bank of India Act broadly defines NBFC as:

“a financial institution which is a company;

OR

a non-banking institution which is a company and whose principal business is receiving deposits under any scheme or arrangement or lending in any manner;

such other non-banking institution or class of institutions as RBI may specify.”

RBI generally determines whether a company is an NBFC based on the “principal business criteria”:

A company becomes an NBFC if:

1. Financial assets > 50% of total assets, and

2. Income from financial assets > 50% of gross income

Both conditions must be satisfied.

The Reserve Bank of India (Reserve Bank of India) has on 29^th April 2026 issued amendment directions reviewing the regulatory framework applicable to certain Non-Banking Financial Companies (NBFCs) effective from 1^st July2026.

Eligible NBFCs

1. NBFCs not availing public funds

These are companies that:

• Do not accept deposits from public either directly or indirectly through associates or group entities
• Do not raise money from retail investors either directly or indirectly through associates or group entities
• Operate using internal/group funds only

2. NBFCs without customer interface

These NBFCs:

• Do not provide loans/services directly or indirectly to public customers
• Operate in a wholesale, group, or investment-only structure

3. Asset size below ₹1,000 crore (based on latest audited balance sheet), in case of multiple Type 1 NBFCs in the group, assets size shall be aggregated of all group entities.

The NBFCs meeting the above criteria will be called as Unregistered Type 1 NBFC.

The unregistered Type 1 NBFC need to disclose in their audited financial statements also that they have not accepted public funds and do not have customer interface.

The above exemption is not applicable in case the NBFC intends to undertake overseas investment in financial services sector.

The exemption applies only from the requirement of:

• Registration under Section 45-IA
• Reserve fund requirements under Section 45-IC

RBI still retains supervisory and penal powers if risks arise.

Impact of the amendment

Eligible existing NBFCs may apply for deregistration through RBI’s PRAVAAH portal by 31^st December 2026.

Newly proposed entities are also exempt from registration, provided they:

• have asset size below ₹1,000 crore,
• do not avail directly or indirectly public funds,
• do not have customer interface, and
• do not intend to do so in future.