RBI exempts small NBFCs from registration

The Reserve Bank of India issued final guidelines exempting Non-Banking Financial Companies (NBFCs) with asset size below ₹1,000 crore that do not avail publ...

What Happened

The Reserve Bank of India issued final guidelines exempting Non-Banking Financial Companies (NBFCs) with asset size below ₹1,000 crore that do not avail public funds and have no customer interface from the mandatory registration requirement under Section 45-IA of the RBI Act, 1934.
These entities will be designated as "Unregistered Type I NBFCs" — creating a new regulatory category for the first time in India's NBFC framework.
The RBI introduced a one-time deregistration window, allowing existing eligible NBFCs to apply for exit from the formal regulatory perimeter by December 31, 2026 — the first structured exit route ever provided.
Separately, the RBI issued revised guidelines for relief measures in areas affected by natural calamities, effective April 1, 2026, extending the framework to include NBFCs alongside banks.
The natural disaster relief framework mandates resolution to be invoked within 45 days and implemented within 90 days of a calamity declaration, with an additional 5% provisioning requirement for restructured accounts.

Static Topic Bridges

NBFC Regulatory Framework and Section 45-IA

Non-Banking Financial Companies (NBFCs) are entities registered under the Companies Act and engaged in financial intermediation (lending, investment) but without a banking licence. They are governed primarily under Chapter III-B of the RBI Act, 1934, with Section 45-IA requiring mandatory RBI registration before commencing NBFC business. The minimum Net Owned Fund (NOF) requirement is ₹10 crore (enhanced from ₹2 crore effective October 2022).

Categories exempt from registration (pre-2026): Housing Finance Companies, Merchant Bankers, Stock Exchanges, Venture Capital Funds, Nidhi Companies, Insurance companies, and Chit Fund Companies — subject to regulation by sector-specific regulators.
The new "Unregistered Type I NBFC" classification adds a new exemption path for small, non-public-facing entities.
Eligibility criteria for exemption: (i) asset size under ₹1,000 crore; (ii) no public funds (deposits or borrowings from retail public); (iii) no customer interface.
Group aggregation rule: If combined assets of multiple Type I NBFCs in a group exceed ₹1,000 crore, all must register.
Applicants must submit three years of audited financials and a statutory auditor certificate confirming absence of public funds and customer interface.

Connection to this news: The exemption reduces regulatory compliance burden on small, non-systemic entities that pose minimal risk to the financial system, aligning India's NBFC architecture with proportionate regulation principles.

NBFC Regulation — Scale-Based Framework

The RBI shifted to a Scale-Based Regulation (SBR) framework for NBFCs in October 2021, categorising entities into four layers: Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL), and Top Layer (NBFC-TL) — based on asset size, systemic importance, and public fund exposure. Regulatory requirements become progressively stringent up the scale.

NBFC-UL: Top 10 most systemically important NBFCs (above ₹100 crore threshold from UL list), subject to near-bank-level regulation.
NBFC-ML: Includes deposit-taking NBFCs, systemically important non-deposit-taking NBFCs (NBFC-NDSI, asset size ≥ ₹500 crore).
NBFC-BL: All remaining NBFCs — lighter regulation.
The "Unregistered Type I" category effectively sits below the Base Layer — outside the regulatory perimeter entirely, provided eligibility criteria are met.

Connection to this news: The new unregistered category is consistent with SBR's proportionality logic — entities with no public money at risk and no retail interface do not warrant the same oversight as deposit-taking or systemically important NBFCs.

RBI Natural Disaster Relief Framework

The RBI's relief framework for natural calamity-hit areas enables banks and NBFCs to restructure borrower accounts without triggering NPA classification, provided the calamity is officially declared and the borrower meets eligibility conditions. This is distinct from general restructuring (which triggers sub-standard classification) because sovereign-declared disasters create systemic, non-credit-specific distress.

Eligibility: Standard accounts with arrears not exceeding 30 days as on the date of the calamity.
Permissible relief: Rescheduling of repayments, moratorium, conversion of interest into term loan, sanction of fresh credit.
Asset classification: Standard status can be retained or restored, subject to additional 5% specific provision on restructured accounts.
Timeline: Resolution must be invoked within 45 days of calamity; implemented within 90 days.
Proactive relief (fee waiver, charge waiver up to 12 months) is permitted without borrower application.

Connection to this news: The revised guidelines now formally extend this framework to NBFCs — previously more prominently bank-focused — strengthening credit access in disaster-affected regions where NBFC lending is significant (microfinance, MSME, agriculture).

Key Facts & Data

Legal basis for NBFC registration: Section 45-IA, RBI Act, 1934 (Chapter III-B).
Minimum Net Owned Fund for NBFCs: ₹10 crore (since October 2022).
Exemption threshold (new): Asset size below ₹1,000 crore; no public funds; no customer interface.
New category name: "Unregistered Type I NBFC."
Deregistration window: By December 31, 2026 (first-ever structured exit route).
Natural disaster relief framework effective: April 1, 2026.
Provisioning add-on for restructured disaster accounts: 5% additional specific provision.
Resolution timeline: 45 days to invoke, 90 days to implement.
Total registered NBFCs in India: Over 9,000 (as of 2025); the exemption is expected to reduce the registered base by entities that never engaged with public funds.