What changed
This Master Circular replaces the April 24, 2024 version, consolidating all instructions on bank finance to NBFCs issued up to March 31, 2025. It does not introduce any new guidelines but serves as a single reference document for existing regulatory policies.
What it means for you
Banks must now refer to this updated circular for compliance with NBFC financing norms, including prudential exposure limits and prohibited activities. The consolidation ensures clarity but requires banks to align their internal policies with the latest consolidated instructions.
What you must do
- Review and update internal policies on NBFC financing to align with the consolidated Master Circular.
- Ensure compliance with prudential exposure ceilings and restrictions on bridge loans, advances against shares, and guarantees.
- Train credit teams on the updated circular, focusing on eligible and ineligible activities for bank credit.
- Monitor NBFC borrower classifications (registered vs. unregistered) to apply correct financing rules.
Who it affects
All scheduled commercial banks (excluding RRBs), Credit and risk management departments
Does this Master Circular introduce new restrictions on NBFC financing?
No, it only consolidates existing instructions issued up to March 31, 2025, without adding new guidelines.
Are Housing Finance Companies (HFCs) covered under this circular?
Yes, HFCs registered under Section 29A of the National Housing Bank Act, 1987 are included in the definition of NBFCs.
What are the key prohibited activities for bank finance to NBFCs?
Prohibitions include bridge loans/interim finance, advances against collateral security of shares, and restrictions on guarantees for placement of funds with NBFCs.