No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2010-11/453 · issued 30 Mar 2011 · ~1 min read
Quick answerRBI prohibits all NBFCs from contributing capital to or becoming partners in partnership firms, citing risks. Existing partnerships must be exited early. This applies to both deposit-taking and non-deposit-taking NBFCs, effective March 30, 2011.
The rule, in the simplest words
NBFCs (companies that lend money but are not banks) are not allowed to put money into or become a partner in a partnership firm (a business owned by two or more people).
If an NBFC already has money in a partnership firm, it must leave that partnership as soon as possible.
This rule applies to all NBFCs, whether they take deposits from the public or not.
The rule started on March 30, 2011, and NBFCs must follow it right away.
How it plays out — a real example
A compliance officer at an NBFC in Chennai reviews the company's investment list and finds a 5-year-old partnership with a local trading firm. She immediately starts the paperwork to exit that partnership, following the RBI's rule, and updates the company's policy to stop any new partnership deals.
What changed
RBI issued two notifications amending the Prudential Norms Directions for deposit-accepting and non-deposit-accepting NBFCs. A new paragraph (19A for deposit-accepting, 20A for non-deposit-accepting) prohibits NBFCs from contributing capital to or being partners in partnership firms. Existing partnerships must be wound up early.
What it means for you
NBFCs can no longer use partnership structures for investments, closing a route that exposed them to unlimited liability and governance risks. Lenders must review and exit any existing partnership holdings immediately. This tightens NBFC risk management and aligns with RBI's focus on corporate structure transparency.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Identify all existing investments in or partnerships with partnership firms.
Initiate early retirement from such partnerships and document the exit plan.
Ensure no new capital contributions or partnership agreements are entered into.
Update internal compliance policies to reflect this prohibition.
Report compliance status to RBI as part of prudential norms adherence.
Who it affects
All deposit-accepting NBFCs, All non-deposit-accepting NBFCs, NBFC compliance and legal teams, Partnership firms with NBFC partners
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Does this ban apply to all NBFCs or only deposit-taking ones?
It applies to both. Notification DNBS.227 covers deposit-accepting NBFCs, and DNBS.228 covers non-deposit-accepting NBFCs. Both are prohibited from contributing capital to or being partners in partnership firms.
What should an NBFC do if it is already a partner in a partnership firm?
The NBFC must seek early retirement from the partnership firm. The circular does not specify a deadline, but 'early retirement' implies prompt action. Document the exit process and ensure compliance.
Are there any exceptions or grandfathering provisions?
No exceptions or grandfathering are mentioned in the circular. The prohibition is immediate for new investments, and existing partnerships must be exited early.
📜 This document’s life story (2 recorded events, each backed by RBI’s own words)
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/453
DNBS.PD/ CC.NO. 214/03.02.002/2010-11
March 30, 2011
All NBFCs
Dear Sir,
NBFCs not to be Partners in Partnership firms
It has come to the notice of the Reserve Bank of India that some NBFCs have large investments in / have contributed capital to partnership firms.
2. In view of the risks involved in NBFCs associating themselves with partnership firms, it has been decided to prohibit NBFCs from contributing capital to any partnership firm or to be partners in partnership firms. In cases of existing partnerships, NBFCs may seek early retirement from the partnership firms.
3. Copies of Amending Notifications No. DNBS.227/CGM (US)-2011 and No. DNBS.228/ CGM (US)-2011 dated March 30, 2011 are enclosed for meticulous compliance.
Yours sincerely,
(Uma Subramaniam)
Chief General Manager-in-Charge
Encl: as above
RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI 400 005.
Notification no. DNBS.227 / CGM(US)-2011 dated March 30, 2011
The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (hereinafter referred to as the said Directions) contained in Notification No. DNBS. 192/DG(VL)-2007 dated February 22, 2007, in exercise of the powers conferred by section 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said Directions shall be amended with immediate effect as follows-
Insertion of new paragraph 19 A-
After paragraph 19 of the said Directions, the following paragraph 19A shall be inserted.
"NBFCs not to be partners in partnership firms"
19A. (1) No non-banking financial company, which is accepting public deposit shall contribute to the capital of a partnership firm or become a partner of such firm.
(2) A non-banking financial company, which is accepting public deposit and which had already contributed to the capital of a partnership firm or was a partner of a partnership shall seek early retirement from the partnership firm.
(Uma Subramaniam)
Chief General Manager
RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI 400 005.
Notification no. DNBS. 228 / CGM(US)-2011 dated March 30, 2011
The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (hereinafter referred to as the said Directions) contained in Notification No. DNBS. 193/DG(VL)-2007 dated February 22, 2007, in exercise of the powers conferred by section 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said Directions shall be amended with immediate effect as follows, namely -
Insertion of new paragraph 20 A-
After paragraph 20 of the said Directions, the following paragraph 20A shall be inserted.
"NBFCs not to be partners in partnership firms"
20A. (1) No non-banking financial company shall contribute to the capital of a partnership firm or become a partner of such firm.
(2) A non-banking financial company, which had already contributed to the capital of a partnership firm or was a partner of a partnership firm shall seek early retirement from the partnership firm.
(Uma Subramaniam)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/453 · issued 30 Mar 2011. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 03 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=6313&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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