Home › Circulars › RBI/2012-13/96

Master Circular: Bank Finance to NBFCs (2012)

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2012-13/96 · issued 02 Jul 2012 · ~2 min read
Quick answerRBI updated its consolidated guidelines on bank lending to NBFCs, removing the Net Owned Fund-linked ceiling for registered NBFCs. Banks now have more freedom to extend working capital and term loans based on their own policies, subject to prudential exposure limits and activity restrictions.

What changed

The ceiling on bank credit linked to NBFCs' Net Owned Fund (NOF) was withdrawn for all NBFCs registered with RBI and engaged in asset financing, loan, factoring, or investment activities.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. The circular consolidates all prior instructions issued up to June 30, 2012.

What it means for you

Banks gain greater operational freedom in lending to registered NBFCs, as the NOF-linked cap is removed. However, restrictions on financing certain activities (e.g., bridge loans, advances against shares as collateral) remain. Banks must formulate their own loan policies with board approval and adhere to prudential exposure ceilings.

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

Who it affects

All Scheduled Commercial Banks (excluding RRBs), NBFCs registered with RBI (asset financing, loan, factoring, investment companies), Residuary Non-Banking Companies (RNBCs), Factoring companies

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Does this circular apply to Regional Rural Banks?

No, the circular explicitly excludes Regional Rural Banks (RRBs) from its scope.

Are there any activities for which bank finance to NBFCs is still prohibited?

Yes, prohibitions remain on bridge loans/interim finance, advances against collateral security of shares to NBFCs, and guarantees for placement of funds with NBFCs.

What is the key change regarding the Net Owned Fund (NOF) ceiling?

The earlier ceiling on bank credit linked to NBFCs' NOF has been withdrawn for all NBFCs registered with RBI and engaged in principal business of asset financing, loan, factoring, or investment activities.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #1274: DBOD.BP.BC.No.27/21.04.172/2012-13 — "Master Circular - Bank Finance to Non-Banking Financial Companies (NBFCs)" dated July 2, 2012”
📜 Read the original circular — full text as issued by RBI
RBI/2012-13/96 DBOD.BP.BC.No.27/21.04.172/2012-13 July 2, 2012 Chairman and Managing Directors / Chief Executives of All Scheduled Commercial Banks (Excluding RRBs) Dear Sir, Master Circular - Bank Finance to Non-Banking Financial Companies (NBFCs) Please refer to our Master Circular No.RBI/2011-12/71 DBOD.BP.BC.No.20/21.04.172/2011-12 dated July 1, 2011 on the captioned subject. The Master Circular has been suitably updated by incorporating instructions issued up to June 30, 2012 and has also been placed on the RBI web-site ( http://www.rbi.org.in ). Yours faithfully, (Deepak Singhal) Chief General Manager-in-Charge Master Circular on 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/2011-12/71 DBOD.BP.BC.No.20/21.04.172/2011-2012 dated July 1, 2011 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/2012-13/96 · issued 02 Jul 2012. 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=7395&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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