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The RBI has proposed a regulatory change exempting small non-deposit-taking NBFCs with assets under INR 1,000 crore from mandatory registration, creating a new category called Unregistered Type I NBFCs. These companies, which operate without public funds or customer interaction, are considered low-risk and not subject to systemic concerns. The exemption, effective April 2026, aims to ease compliance while maintaining safeguards, as any such NBFC intending to access public funds or serve customers must register as a Type II NBFC. The RBI is seeking stakeholder feedback on the draft directions by March.
The Reserve Bank of India has proposed exempting certain non-deposit-taking non-banking financial companies (NBFCs) from registration to reduce compliance requirements. Under the draft circular, NBFCs that do not access public funds and have no customer interface, with an asset size of less than INR 1,000 crore, would be classified as Type-I NBFCs and would not need to register with the central bank due to their lower risk profile. Advertisement
The draft amendment specifies that these companies will be exempt from provisions under section 45IA of the RBI Act, 1934, effective from April 1, 2026. Until now, such NBFCs were required to register under this section. In an FAQ released alongside the draft, the RBI noted that these entities will be referred to as Unregistered Type I NBFCs.
The RBI highlighted that these companies typically invest using their own funds and do not pose systemic risks or customer protection concerns because of their business model and small asset base. However, any Unregistered Type I NBFC that plans to access public funds or interact with customers must register as a Type II NBFC before doing so to avoid penalties.
Currently, NBFCs are classified into base layer, middle layer, upper layer, and top layer based on asset size, with those not availing public funds or customer interface categorized as base layer. The draft proposal aims to formalize this category while reducing regulatory burden for smaller, low-risk NBFCs. Stakeholders have been invited to provide comments on the draft by early March.
Source PTI
FAQ
Q1. What regulatory change has the RBI proposed for small NBFCs?
The Reserve Bank of India has proposed exempting certain non-deposit-taking NBFCs with assets under INR 1,000 crore from the mandatory requirement of registration. These companies operate without public funds or direct customer interaction and are considered low-risk. The move is aimed at easing compliance requirements for smaller NBFCs while maintaining financial stability and safeguarding public interest.
Q2. What is the new category being introduced under this proposal?
The RBI draft introduces a category called Unregistered Type I NBFCs. Entities falling under this category will not need to register under Section 45IA of the RBI Act, 1934, effective from April 1, 2026. The formalization of this category is intended to distinguish low-risk NBFCs from those that have public exposure or systemic significance.
Q3. Which NBFCs are eligible for this exemption?
NBFCs that do not accept public funds, do not have customer interaction, and maintain total assets below INR 1,000 crore will qualify as Unregistered Type I NBFCs. These are typically companies using only their own funds for lending or investment activities, posing minimal risk to the financial system or consumers.
Q4. What if an Unregistered Type I NBFC wants to access public funds or serve customers in the future?
Any Unregistered Type I NBFC planning to access public funds or interact with customers must register as a Type II NBFC before starting such activities. This ensures they are subject to regulatory oversight, risk management requirements, and consumer protection norms to avoid potential penalties.
Q5. Why is the RBI introducing this exemption?
The exemption is designed to reduce the regulatory burden on small, low-risk NBFCs, allowing them to operate more efficiently without unnecessary compliance costs. At the same time, it ensures that NBFCs engaging with public funds or customers remain fully regulated, balancing ease of doing business with financial stability.
Q6. How are NBFCs currently classified under RBI regulations?
NBFCs are presently classified into base layer, middle layer, upper layer, and top layer, depending on asset size and systemic importance. Those that do not accept public funds or interact with customers are considered part of the base layer. The new proposal formalizes this base layer as the Unregistered Type I NBFC category, simplifying compliance for these entities.
Q7. When is stakeholder feedback due on this draft?
The RBI has invited feedback and comments from stakeholders on the draft directions by early March 2026, before finalizing the rules.
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