RBI eases NBFC norms in big push for smaller shadow banks

Sanjay Malhotra, Governor, RBI

Reserve Bank of India (RBI) governor Sanjay Malhotra on February 6 unveiled a fresh set of regulatory initiatives for non‑banking financial companies (NBFCs), as part of the central bank’s Monetary Policy Committee (MPC) statement.

"With macro indicators such as capital adequacy, liquidity and asset quality remaining broadly sound across scheduled commercial banks and non‑bank lenders", the calibrated approach seeks to foster sustainable credit growth without compromising stability.

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NBFC regulatory relief: Smaller players get room to breathe

One of the headline measures is a significant deregulation push for smaller NBFCs.

NBFCs without public funds and without direct customer interface, with total asset size not exceeding Rs 1,000 crore, would be exempted from registering with the RBI.

The move will reduce compliance burden for a large number of smaller finance companies and fintech lenders that operate in niche segments.

The RBI also moved to simplify branch expansion norms for certain NBFCs.

Previously, NBFCs were required to obtain prior RBI approval before opening more than 1,000 branches. Malhotra said this requirement will now be dispensed with for eligible entities, cutting red tape and enabling quicker scaling of operations.

The announcements came against the backdrop of the RBI’s decision to keep the key policy rates unchanged at 5.25 percent, with the MPC retaining a neutral stance on monetary policy. The decision comes amid benign inflation and easing worries over US tariffs after budget measures to boost manufacturing and exports, and a trade deal with Washington.