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RBI Restores NBFC Risk Weights to Pre-November 2023 Levels

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2024-25/120 · issued 25 Feb 2025 · ~1 min read
Quick answerRBI reverses the 25 percentage point risk weight hike on SCB exposures to NBFCs, effective April 1, 2025. Risk weights will now follow external ratings per the Basel III Master Circular, easing capital requirements for banks lending to most NBFCs.

What changed

The November 2023 circular had increased risk weights on SCB exposures to NBFCs by 25 percentage points for those rated below 100%. This circular restores those risk weights to the original external rating-based levels as per the Basel III Master Circular, effective April 1, 2025.

What it means for you

Banks will see lower capital requirements on loans to most NBFCs, freeing up capital for other lending. This reversal signals RBI's confidence in NBFC sector health and may improve bank profitability on such exposures. Exclusions for HFCs and priority sector NBFC loans remain unchanged.

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 (including Small Finance Banks), NBFCs (excluding HFCs and priority sector NBFCs), Bank risk management and credit departments

❓ Common questions

Regulatory timeline

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

When does the new risk weight rule take effect?

The restoration of risk weights to external rating-based levels is effective from April 1, 2025.

Does this apply to all NBFC exposures?

No, it excludes loans to housing finance companies and NBFC loans classified as priority sector, which remain under existing instructions.

What was the previous risk weight increase?

The November 2023 circular had added 25 percentage points to risk weights for NBFC exposures where the external rating-based risk weight was below 100%.

📜 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Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)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 #80: DOR.STR.REC.61/21.06.001/2024-25 — "Exposures of Scheduled Commercial Banks (SCBs) to Non-Banking Financial Companies (NBFCs) - Review of Risk Weights" dated Fe”
📜 Read the original circular — full text as issued by RBI
RBI/2024-25/120 DOR.STR.REC.61/21.06.001/2024-25 February 25, 2025 All Scheduled Commercial Banks (including Small Finance Banks but excluding Regional Rural Banks and Payments Banks) Madam / Dear Sir, Exposures of Scheduled Commercial Banks (SCBs) to Non-Banking Financial Companies (NBFCs) – Review of Risk Weights In terms of Paragraph 2.B of the circular ‘Regulatory measures towards consumer credit and bank credit to NBFCs’ dated November 16, 2023 , the risk weight on the exposures of SCBs to NBFCs 1 was increased by 25 percentage points (over and above the risk weight associated with the given external rating) in all cases where the extant risk weight as per external rating of NBFCs was below 100 per cent. 2. On a review, it has been decided to restore the risk weights applicable to such exposures and the same shall be as per the external rating, as specified in Paragraph 5.8.1 of the ‘Master Circular – Basel III Capital Regulations’ dated April 1, 2024 2 , as amended from time to time. 3. The above instructions shall come into effect from April 01, 2025. All other instructions of the circulars ibid remain unchanged. Yours faithfully, (Vaibhav Chaturvedi) Chief General Manager 1 Excluding loans to housing finance companies, and loans to NBFCs which are eligible for classification as priority sector in terms of the extant instructions 2 As also applicable to Small Finance Banks, in terms of Paragraph 1.4 of the Annex to Operating Guidelines for Small Finance Banks dated October 06, 2016
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2024-25/120 · issued 25 Feb 2025. 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=12787&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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