Source: Reserve Bank of India · RBI/2010-11/51 · issued 01 Jul 2010 · ~2 min read
Quick answerRBI updated its master circular on bank finance to NBFCs, consolidating instructions up to June 30, 2010. Key changes include withdrawal of the NOF-linked ceiling for registered NBFCs, allowing need-based working capital and term loans, and continued restrictions on bridge loans and guarantees for fund placements.
What changed
The previous master circular from July 1, 2009 was updated by incorporating all instructions issued up to June 30, 2010. The ceiling on bank credit linked to Net Owned Fund (NOF) of NBFCs registered with RBI was withdrawn for those engaged in asset financing, loan, factoring, and investment activities. Banks can now extend need-based working capital and term loans to such NBFCs, and also finance against second-hand assets financed by them.
What it means for you
Banks gain more flexibility in lending to registered NBFCs, as the NOF-linked cap is removed, allowing credit decisions based on borrower needs and bank's own policy. However, restrictions on bridge loans, advances against shares, and guarantees for fund placements remain, so lenders must ensure compliance with prudential exposure norms. This circular consolidates all existing rules, making it a single reference for NBFC financing.
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
Review and update your bank's loan policy for NBFCs with board approval, incorporating the withdrawn NOF ceiling and need-based lending approach.
Ensure all NBFC exposures comply with prudential ceilings and exposure norms prescribed by RBI.
Continue to prohibit bridge loans, advances against shares to NBFCs, and guarantees for fund placements with NBFCs as per restrictions.
Classify NBFC borrowers correctly as registered, unregistered, or RNBCs to apply the appropriate financing rules.
Who it affects
All scheduled commercial banks (except RRBs), NBFCs registered with RBI, Residuary Non-Banking Companies (RNBCs), Factoring companies
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Can we now lend to any NBFC without a ceiling?
For NBFCs registered with RBI and engaged in asset financing, loan, factoring, or investment, the NOF-linked ceiling is withdrawn. However, banks must still follow prudential exposure norms and board-approved policies.
Are there any activities we cannot finance through NBFCs?
Yes, the circular lists activities not eligible for bank credit, and specifically prohibits bridge loans, advances against shares to NBFCs, and guarantees for placement of funds with NBFCs.
Does this circular apply to RRBs?
No, the application is to all scheduled commercial banks except Regional Rural Banks (RRBs).
📜 This document’s life story (2 recorded events, each backed by RBI’s own words)
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #1646: DBOD.BP.BC.No.5/21.04.172/2010-11 — "Master Circular - Bank Finance to Non-Banking Financial Companies (NBFCs)" dated July 1, 2010”
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/51
DBOD.BP.BC.No.5 /21.04.172/2010-11
July 1, 2010
Chairman and Managing Directors /
Chief Executives of
All Commercial Banks
Dear Sir,
Master Circular - Bank Finance to Non-Banking Financial Companies (NBFCs)
Please refer to our Master Circular No.RBI/2009-10/30 DBOD.BP.BC.No.5/21.04.172/2009-2010 dated July 1, 2009 on the captioned subject. The Master Circular has been suitably updated by incorporating instructions issued up to June 30, 2010 and has also been placed on the RBI web-site ( http://www.rbi.org.in ).
Yours faithfully,
(B.Mahapatra)
Chief General Manager-in-Charge
Master Circular Bank Finance to Non-Banking Financial Companies (NBFCs )
Purpose
To lay down the Reserve Bank of India's regulatory policy regarding financing of NBFCs by banks.
Classification
A statutory guideline issued under Section 35A of Banking Regulation Act, 1949
Previous guidelines superceded
Master circular No. RBI/2009-10/30 DBOD.BP.BC.No.5/21.04.172/2009-2010 dated July 1, 2009 on Bank Finance to Non-Banking Financial Companies (NBFCs).
Application
To all Scheduled Commercial Banks (except Regional Rural Banks ).
Structure
1.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/51 · issued 01 Jul 2010. The plain-English explanation above is BankPulse’s own independent summary.
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 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=5771&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.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.