NBFC Corporate Governance: Connected Lending Rules on Hold
Current · Source: Reserve Bank of India · RBI/2007-2008/92 · issued 11 Jul 2007 · ~2 min read
Quick answerRBI has deferred the operationalisation of connected lending norms for NBFCs (para 2(vi) of May 8, 2007 circular) pending review of suggestions. All other corporate governance instructions from that circular remain effective immediately.
The rule, in the simplest words
Connected lending rules for NBFCs [non-bank financial companies] are on hold until further review
All other corporate governance rules from the May 8, 2007 circular must still be followed
NBFCs must comply with all rules except the connected lending part, which is being reviewed
The delay in connected lending rules is temporary and does not mean overall governance standards are relaxed
How it plays out — a real example
A compliance officer at an NBFC in Mumbai will continue to ensure their company follows all corporate governance norms, except for the connected lending requirements, until the RBI issues final guidelines after reviewing suggestions. This officer will closely monitor RBI announcements for updates on the connected lending rules to ensure their NBFC is prepared to implement them as soon as they become operational. Meanwhile, the officer will review the company's governance framework to ensure it aligns with the effective parts of the circular.
What changed
RBI received suggestions on the connected lending instructions (paragraph 2(vi)) issued in the May 8, 2007 corporate governance circular. The central bank has decided to study these suggestions before making the connected lending rules operational. All other provisions of the May 8 circular must be complied with as originally directed.
What it means for you
NBFCs covered by the circular get temporary relief from implementing the specific connected lending requirements, but must still adhere to all other corporate governance norms. Lenders should not assume a relaxation of overall governance standards; the deferral is limited to one clause. Banks and NBFCs should continue to monitor for final guidelines on connected lending.
What you must do
Comply meticulously with all corporate governance instructions from the May 8, 2007 circular except paragraph 2(vi) on connected lending.
Do not implement connected lending norms until RBI issues final operational guidelines after reviewing suggestions.
Review your NBFC's governance framework to ensure alignment with the effective parts of the circular.
Track RBI announcements for the final decision on connected lending rules.
Who it affects
Deposit-taking NBFCs with deposit size of Rs 20 crore and above, Non-deposit taking NBFCs with asset size of Rs 100 crore and above (NBFC-ND-SI)
❓ Common questions
Which specific clause of the May 8, 2007 circular is deferred?
Paragraph 2(vi) of the circular, which contains instructions on connected lending, has been deferred pending review of suggestions.
Are all other corporate governance instructions still applicable?
Yes, all other instructions issued in the May 8, 2007 circular must be complied with meticulously as per RBI's directive.
When will the connected lending norms become operational?
RBI has not set a specific date. The norms will become operational after the central bank completes its evaluation of suggestions and any modifications considered necessary.
📜 Read the original circular — full text as issued by RBI
RBI/2007-2008/92
DNBS.PD/ CC 104 / 03.10.042 /2007-08
July 11, 2007
The Chairman/CEO
1. All Deposit taking NBFCs with deposit size of Rs 20 crore and above
2. All non-deposit taking NBFCs with asset size of Rs 100 crore and above (NBFC-ND-SI).
Dear Sir,
Guidelines on Corporate Governance
Please refer to our circular DNBS.PD/ C.C. 94 / 03.10.042 /2006-07 dated May 8, 2007 on the captioned subject. The Bank has received suggestions with reference to paragraph 2(vi) of the circular containing instructions on connected lending.
2. The suggestions are being studied and the instructions contained in paragraph 2 (vi) of the circular will become operational after final evaluation of the suggestions and modifications, if any considered necessary. All other instructions issued vide, Company Circular dated May 8, 2007 may be complied meticulously.
Yours faithfully,
(P. Krishnamurthy)
Chief General Manager In-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/92 · issued 11 Jul 2007. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Deposit-taking NBFCs with deposit size of Rs 20 crore and above, Non-deposit taking NBFCs with asset size of Rs 100 crore and above (NBFC-ND-SI)), your first concrete step on “NBFC Corporate Governance: Connected Lending Rules on Hold” is: “Comply meticulously with all corporate governance instructions from the May 8, 2007 circular except paragraph 2(vi) on connected lending.” (RBI issued this 11 Jul 2007).
Circular: RBI/2007-2008/92 -- NBFC Corporate Governance: Connected Lending Rules on Hold
Issued: 11 Jul 2007
Action required: Comply meticulously with all corporate governance instructions from the May 8, 2007 circular except paragraph 2(vi) on connected lending.
Action required: Do not implement connected lending norms until RBI issues final operational guidelines after reviewing suggestions.
Action required: Review your NBFC's governance framework to ensure alignment with the effective parts of the circular.
Action required: Track RBI announcements for the final decision on connected lending rules.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3706&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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