NBFCs have to restrict their lending only to term loans; cannot offer ‘revolving credit’: RBI Draft Directions

According to RBI’s draft guidelines, non‑banking finance companies (NBFCs) may lend solely through term loans and are prohibited from providing revolving‑credit products.

This restriction does not apply to an NBFC that has been authorised by the Reserve Bank to issue credit cards, as stated in the Draft Reserve Bank of India (Non‑Banking Financial Companies – Credit Facilities) Amendment Directions, 2026.

‘Revolving credit’ denotes any fund‑based credit facility that does not qualify as a term loan.

A ‘term loan’ is a fund‑based credit facility of a fixed principal amount extended by an NBFC to a borrower. The approved limit is released in one or more tranches and must be repaid according to a set amortisation schedule—either through regular instalments or a single bullet payment on the specified due date(s). After disbursement, the sanctioned limit cannot be revived or topped up, even if the borrower repays part or all of the principal.

The Reserve Bank has invited comments and feedback on the draft Amendment Directions from regulated entities and other interested parties, with a deadline of 28 August 2026.

Published on August 7, 2026