RBI draft offers 2026 relief for NBFCs below ₹1,000 cr

What the RBI has put on the table

The Reserve Bank of India (RBI) has proposed a targeted registration relief for a narrow set of low-risk non-banking financial companies (NBFCs). The proposal is part of draft amendments to the RBI (Non-Banking Financial Companies - Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025, issued as the draft Amendment Directions, 2026. The draft was introduced on February 10, 2026, and multiple summaries of the proposal were published on March 5, 2026.

At the centre of the draft is a new category called “Unregistered Type-I NBFCs”. These are NBFCs that do not access public funds, do not have a customer interface, and have assets below ₹1,000 crore. If implemented as proposed, such entities would be exempt from the mandatory registration requirement under Section 45IA of the RBI Act, 1934, from April 1, 2026.

The RBI’s stated intent is proportionate, risk-based regulation. The draft recognises that entities that operate only with owned funds and without customer-facing business typically pose lower systemic and consumer protection risks than larger or public-facing NBFCs.

Draft timeline and consultation window

The RBI invited stakeholder comments on the draft directions until March 4, 2026. The exemption itself, as proposed in the draft, is intended to take effect from April 1, 2026. For existing entities that currently hold registration but would qualify for the exemption, the draft provides a deregistration window.

This sequencing matters because it creates three checkpoints for affected NBFCs: review the final directions (post-consultation), assess eligibility as on April 1, 2026, and decide whether to apply for deregistration within the prescribed timeline.

Who qualifies as an “Unregistered Type-I NBFC”

The proposed exemption is not meant for all small NBFCs. It is limited to “NBFCs not availing public funds and not having any customer interface” with asset size of less than ₹1,000 crore. The draft describes Type-I NBFCs as entities that neither access public funds nor have customer interface.

The RBI also clarified in draft FAQs that newly incorporated companies may remain exempt if they do not intend to avail public funds, do not have any customer interface, and their asset size remains below ₹1,000 crore. In other words, the exemption is tied to an ongoing business model choice, not a one-time eligibility test.

The draft also references the principal business criteria set out in the RBI’s Press Release 1998-99/1269 dated April 08, 1999 as part of how “Unregistered Type I NBFCs” are described.

Conditions attached to the exemption

The relief is framed as an exemption from registration, not a blanket carve-out from RBI oversight. To qualify and continue to qualify, the entity must keep meeting the “no public funds” and “no customer interface” conditions and remain below the asset threshold.

The draft sets out disclosure and governance conditions. These include disclosure in the Notes to Accounts that the company is an ‘Unregistered Type I NBFC’ and disclosure of its public funds and customer interface status. It also includes an annual Board Resolution stating that the company will not avail public funds and will not have customer interface during the year. In addition, one condition described in the article text is that the statutory auditor’s report should not qualify non-compliance of the relevant exemption conditions.

What changes for existing registered Type-I NBFCs

The draft creates a pathway for deregistration for existing registered NBFCs that meet the exemption criteria. NBFCs that are registered as Type-I NBFCs and have asset size below ₹1,000 crore as at March 31, 2026 can apply to the RBI for deregistration and be categorised as an unregistered NBFC, along with specified documents.

Separately, the draft directions state that existing eligible entities, including those holding a Certificate of Registration (CoR) as ‘Type I NBFC’ as on April 1, 2026, may apply for deregistration within six months, by September 30, 2026. Applications are to be made through PRAVAAH, as referenced in the draft text.

The RBI has also clarified in its draft FAQs that applying for deregistration is an option for eligible existing NBFCs, not an obligation.

When the exemption stops applying

The exemption is designed to end automatically if the NBFC’s profile changes. The draft is explicit on two triggers.

First, if an exempt entity intends to avail public funds or introduce customer interface, it must seek registration with the RBI as a Type II NBFC before undertaking such activities. The RBI also cautioned that availing public funds or engaging with customers without registration would violate the exemption conditions and may attract penal action under the RBI Act.

Second, if an entity’s asset size reaches ₹1,000 crore or above, it must obtain registration as a Type I NBFC. The draft reiterates that entities at or above ₹1,000 crore are required to register even if they still do not avail public funds and do not have customer interface.

How the RBI is tightening the definitional boundary

While the proposal reduces compliance burden for a subset of NBFCs, it also tightens the definitional boundary for that relief by anchoring it to three measurable tests: public funds, customer interface, and a hard asset-size ceiling. The draft also draws a clear line between Type I and Type II NBFCs in its FAQs, stating that exempt entities are categorised as Type I, while other registered NBFCs fall under Type II.

This approach aligns with the RBI’s broader scale-based regulation framework, where smaller, lower-risk entities sit in the “base layer” with lighter prescriptions. The draft notes that NBFCs holding CoR as Type I NBFCs are placed in the base layer and subject to lower regulatory prescriptions and supervisory oversight.

Oversight remains, despite registration relief

A key clarification in the draft is that exemption is only from Section 45IA of the RBI Act, 1934, which is the registration requirement. Because these entities conduct non-banking financial institution activities, they would continue to be subject to other provisions of Chapter IIIB of the RBI Act.

The RBI also reserves the right to issue instructions specifically to ‘Unregistered Type I NBFCs’ if concerns or risks are observed. This framing is meant to ensure that the exemption does not get interpreted as regulatory absence, especially if business models evolve or if an entity is found to have breached the exemption conditions.

Link to existing exemptions and minimum NOF rule

The draft is described as broadly aligned with existing regulatory treatment for Core Investment Companies (CICs). Under the cited framework, CICs below asset size of ₹100 crore, or those not accessing public funds, are exempt from registration and treated as “Unregistered CICs”. The RBI’s draft extends a similar logic to qualifying Type-I NBFCs.

The article text also reiterates the broader legal position under Section 45-IA: no company can commence or carry on the business of a non-banking financial institution without registration and without meeting the Net Owned Funds (NOF) requirement. The NOF threshold mentioned is ₹10 crore with effect from October 01, 2022, with NBFCs seeking registration required to have ₹10 crore ab initio, and existing NBFCs having time up to March 31, 2027 to attain ₹10 crore.

Other easing measure mentioned: branch expansion approval

Alongside the proposal on unregistered Type-I NBFCs, the RBI also proposed to remove the requirement for certain NBFCs to seek prior approval for opening more than 1,000 branches. This was presented as a separate compliance simplification measure aimed at improving ease of doing business while maintaining stability.

While the branch proposal is distinct from the registration exemption, both sit within the same policy direction of proportionate regulation and process simplification.

Key numbers and deadlines at a glance

Why the proposal matters for the NBFC sector

For NBFCs that operate as investment or financing vehicles using owned funds and without any customer-facing interface, the registration process can be a recurring compliance cost without corresponding risk benefits, especially at smaller balance-sheet sizes. The RBI’s proposal attempts to focus supervisory attention on entities that either deal with customers or have exposure to public funds, where consumer protection and systemic spillovers are more relevant.

At the same time, the RBI has kept guardrails in place through disclosure, Board resolution and auditor-linked conditions, and by stating that penal action can follow if an entity breaches the exemption conditions without obtaining the appropriate registration. This combination signals that the RBI wants fewer filings for low-risk entities, but clearer accountability if business models change.

Conclusion

The RBI’s draft Amendment Directions, 2026 propose a formal “Unregistered Type-I NBFC” category for NBFCs with assets below ₹1,000 crore that do not access public funds and do not have customer interface, with the exemption planned from April 1, 2026. Eligible existing entities may seek deregistration, with a timeline extending to September 30, 2026, and the RBI has clarified that supervision and penal powers under the RBI Act continue. Next milestones for stakeholders are the finalisation of the directions after the comment process and any further regulations the RBI has said it will issue separately for these NBFCs in due course.