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RBI Amends Concentration Risk Management Directions for NBFCs (Second Amendment, 2026)

Current · Source: Reserve Bank of India · RBI/2025-26/227 · issued 10 Mar 2026 · ~1 min read
Quick answerRBI amends concentration risk management directions for NBFCs to review Tier 1 capital definition and introduce external auditor's certificate requirement.
The rule, in the simplest words
How it plays out — a real example

An NBFC compliance officer in Indore, Priya, is updating her NBFC's records after the company raised extra capital from investors. She calls the external auditor to schedule a certificate check, knowing she must submit that certificate to RBI's Department of Supervision before she can use the new funds to meet concentration limits. This way, she ensures her company stays within safe lending boundaries.

What changed

RBI has amended the Master Direction – Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Directions, 2025, via the Second Amendment Directions, 2026, to review the definition of Tier 1 capital and introduce an external auditor's certificate requirement for NBFCs.

What it means for you

This amendment aims to strengthen concentration risk management for NBFCs by ensuring that they maintain adequate capital buffers and adhere to prudential norms.

What you must do

Who it affects

All Non-Banking Financial Companies (NBFCs), RBI Department of Supervision

❓ Common questions

What is the purpose of this amendment?

To strengthen concentration risk management for NBFCs by ensuring that they maintain adequate capital buffers and adhere to prudential norms.

What is the new requirement for Tier 1 capital?

NBFCs must obtain an external auditor's certificate on completion of capital augmentation and submit it to RBI before reckoning additions to capital funds.

📜 Read the original circular — full text as issued by RBI
RBI/2025-26/227 DOR.CAP.REC.No.417/21.01.002/2025-26 March 10, 2026 All Non-Banking Financial Companies (NBFCs) Dear Sir / Madam, Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Second Amendment Directions, 2026 The Reserve Bank had issued the Master Direction – Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Directions, 2025 (hereinafter referred as the 'Master Direction'), on November 28, 2025, as amended from time to time. There is a need to further amend the same to review the definition of Tier 1 capital being reckoned for complying with extant credit / investment concentration norms for NBFCs. 2. Accordingly, in exercise of the powers conferred by Chapter III B of the Reserve Bank of India Act, 1934, and all other provisions / laws enabling the Reserve Bank of India ('RBI') in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the following Amendment Directions. 3. Reserve Bank of India (Non-Banking Financial Companies - Concentration Risk Management) Second Amendment Directions, 2026. 4. These Amendment Directions shall come into force from immediate effect. 5. These Amendment Directions modify the Master Direction as under: (1) Paragraph 4 (7) shall be replaced by: "Owned Fund" shall have the same meaning as given in Chapter II of the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025 . (2) Paragraph 4 (8) shall be replaced by: "Tier 1 capital" shall have the same meaning as given in Chapter II of the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025 . However, for the purpose of concentration norms, the NBFC shall obtain an external auditor's certificate on completion of the augmentation of capital and submit the same to the Department of Supervision of the RBI before reckoning the additions to capital funds. (3) The following paragraphs shall be inserted after paragraph 14(2): "14(3) The applicable Tier 1 Capital for compliance with the norms stated in paragraphs 13 and 14 above, shall be determined based on the NBFC's latest available financial statements (audited or subject to limited review). 14(4) The term "Tier 1 Capital" in this context shall be as defined in paragraph 10 of the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025 ." Yours faithfully, Sunil T S Nair Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2025-26/227 · issued 10 Mar 2026. The plain-English explanation above is BankPulse’s own independent summary.
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Key termsPlain-English definitions of terms in this circular — see the full Indian banking glossary. NBFC · CRAR (Capital adequacy) · Gross NPA (GNPA) · Wilful defaulter
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Who does what — compliance checklist
💻 IT / Systems
  • Obtain an external auditor's certificate for capital augmentation
  • Submit the certificate to the Department of Supervision of RBI before reckoning additions to capital funds
📜 Compliance
  • Review and update concentration risk management policies and procedures
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 (All Non-Banking Financial Companies (NBFCs), RBI Department of Supervision), your first concrete step on “RBI Amends Concentration Risk Management Directions for NBFCs (Second Amendment, 2026)” is: “Review and update concentration risk management policies and procedures” (RBI issued this 10 Mar 2026).

  1. Circular: RBI/2025-26/227 -- RBI Amends Concentration Risk Management Directions for NBFCs (Second Amendment, 2026)
  2. Issued: 10 Mar 2026
  3. Action required: Review and update concentration risk management policies and procedures
  4. Action required: Obtain an external auditor's certificate for capital augmentation
  5. Action required: Submit the certificate to the Department of Supervision of RBI before reckoning additions to capital funds
  6. Owner: ____________ Target date: ____________
  7. Board/committee approval needed? Y / N
  8. 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.

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BankPulse Compliance Evidence Pack — generated 02 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=13312&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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