Home › Circulars › RBI/2012-13/241

FDI in NBFCs: Step-down subsidiary rules eased

Current · Source: Reserve Bank of India · RBI/2012-13/241 · issued 10 Oct 2012 · ~2 min read
Quick answerRBI has relaxed FDI norms for NBFCs with foreign ownership above 75% and up to 100%, allowing them to set up step-down subsidiaries without additional capital, provided minimum capitalisation of US$ 50 million is met.
The rule, in the simplest words
How it plays out — a real example

Priya, a compliance officer at a large Mumbai bank, reviews a proposal from an NBFC that is 80% owned by a foreign investor. She remembers the new RBI rule and checks that the NBFC already has US$ 50 million in capital. Satisfied, she approves the NBFC's plan to set up a step-down subsidiary without requiring the foreign owner to send more money, saving the NBFC time and cost.

What changed

Earlier, only 100% foreign-owned NBFCs with US$ 50 million capitalisation could set up step-down subsidiaries without additional capital. Now, NBFCs with foreign investment between 75% and 100% (i.e., above 75% up to 100%) also qualify, subject to the same US$ 50 million minimum capitalisation. The minimum capitalisation condition for downstream subsidiaries under DIPP's Consolidated FDI Policy is waived for these entities.

What it means for you

This change widens the pool of NBFCs eligible to expand through step-down subsidiaries without fresh capital infusion, encouraging more foreign investment in the sector. Banks acting as AD Category-I must update their compliance checks for FDI proposals, as the revised condition applies to all new investments. It also reduces the capital burden for NBFCs with high foreign ownership, potentially boosting their operational flexibility.

What you must do

Who it affects

AD Category-I banks handling FDI remittances for NBFCs, NBFCs with foreign investment above 75% and up to 100%, Foreign investors in the NBFC sector

❓ Common questions

What is the key change in this circular?

The circular expands eligibility for setting up step-down subsidiaries without additional capital to NBFCs with foreign investment above 75% and up to 100%, provided they have a minimum capitalisation of US$ 50 million. Earlier, only 100% foreign-owned NBFCs had this benefit.

Does this circular affect existing NBFCs with foreign investment?

Yes, NBFCs with foreign ownership between 75% and 100% can now set up step-down subsidiaries without bringing in extra capital, as long as they meet the US$ 50 million minimum capitalisation condition. Existing NBFCs should review their structure to see if they qualify.

What should AD Category-I banks do with this circular?

Banks must update their internal procedures to apply the revised condition for FDI in NBFCs, inform their customers, and ensure compliance with the US$ 50 million capitalisation requirement for step-down subsidiaries.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications Withdrawn with effect from November 16, 2021, February 18, 2022, May 02, 2022, May 13, 2022, May 21, 2024, July 12, 2024 & October 01, 2024 ( 534 kb ) Foreign investment in NBFC Sector - Amendment to the Foreign Direct Investment (FDI) Scheme RBI/2012-13/241 A. P. (DIR Series) Circular No. 41 October 10, 2012 To All Category-I Authorised Dealer Banks Madam / Sir, Foreign investment in NBFC Sector - Amendment to the Foreign Direct Investment (FDI) Scheme Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified by the Reserve Bank vide Notification No. FEMA 20/2000-RB dated 3rd May 2000 , as amended from time to time, read with Sr.No.24.2 of Annex B to A.P. (DIR Series) Circular No. 137 dated June 28, 2012 pertaining to sector specific conditions for FDI in NBFCs . 2. It has now been decided in consultation with the Government to amend certain conditions in the aforesaid circular. The amended conditions are given in the Annex . 3. All other conditions contained in Sr. No. 24.2 in the A.P. (DIR Series) Circular No. 137 dated June 28, 2012 shall remain unchanged. 4. A copy of Press Note No.9 (2012 Series) dated October 3, 2012 issued in this regard by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India is enclosed. 5. AD Category - I banks may bring the contents of the circular to the notice of their customers/constituents concerned. 6. Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated May 3, 2000) are being notified separately. 7. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager Annex [A. P. (DIR Series) Circular No. dated October , 2012] c.f. A.P.(DIR Series) Circular No. 137 dated June 28, 2012 Earlier Condition Revised condition Sr.No.24.2 (1) (iv) 10 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1, therefore, shall not apply to downstream subsidiaries. NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1 of DIPP Circular 1of 2012 dated April 10, 2012 on Consolidated FDI Policy, therefore, shall not apply to downstream subsidiaries. 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links : Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. All Rights Reserved. Sitemap | Disclaimer Website owned and managed by Reserve Bank of India. Contact us on helpdoc[at]rbi[dot]org[dot]in Website last updated date: Jul 27, 2026 Supports: Google Chrome 147+ | Firefox 150+ | Microsoft Edge Version 147+ | Safari 17+ Accessibility Statement | Screen Reader and Accessibility Help
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/241 · issued 10 Oct 2012. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Most relevant forCompliance TeamCorporate / Wholesale Banking RMTrade Finance / Forex OperationsSenior Management / BoardInternal AuditRisk Management
🛠 Banker’s toolkit — checklists & reply templates →
Related circulars · Foreign Exchange (FEMA)
RBI raises cash carry limit for travellers to Rs 7,500Rupee Value of Special Currency Basket Revised to Rs.60.897378ECB Policy Liberalised: Cost Ceilings Removed, NBFCs & Realty Get BoostECB: Integrated Township Exemption Removed, Cost Ceilings TightenedRBI Delegates Bank Guarantee Powers for Foreign Airlines to AD Banks
Browse all departments →
Who does what — compliance checklist
💻 IT / Systems
  • Ensure that any FDI proposal for NBFC step-down subsidiaries meets the US$ 50 million minimum capitalisation requirement.
📜 Compliance
  • Update internal FDI processing guidelines to reflect the revised condition for NBFCs with foreign investment above 75% and up to 100%.
  • Inform customers and constituents about the amended step-down subsidiary rules as per the circular.
  • Monitor DIPP's Press Note No.9 (2012 Series) for any further clarifications.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks handling FDI remittances for NBFCs, NBFCs with foreign investment above 75% and up to 100%, Foreign investors in the NBFC sector), your first concrete step on “FDI in NBFCs: Step-down subsidiary rules eased” is: “Update internal FDI processing guidelines to reflect the revised condition for NBFCs with foreign investment above 75% and up to 100%.” (RBI issued this 10 Oct 2012).

  1. Circular: RBI/2012-13/241 -- FDI in NBFCs: Step-down subsidiary rules eased
  2. Issued: 10 Oct 2012
  3. Action required: Update internal FDI processing guidelines to reflect the revised condition for NBFCs with foreign investment above 75% and up to 100%.
  4. Action required: Inform customers and constituents about the amended step-down subsidiary rules as per the circular.
  5. Action required: Ensure that any FDI proposal for NBFC step-down subsidiaries meets the US$ 50 million minimum capitalisation requirement.
  6. Action required: Monitor DIPP's Press Note No.9 (2012 Series) for any further clarifications.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. 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.

Loading comments…
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=7616&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.
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 ↗
—