What changed
The amendment replaces paragraph 3(1) to clarify applicability across all NBFC layers, including HFCs and CICs. Paragraph 5 now generally permits NBFCs to open branches without prior RBI approval unless specifically restricted. Paragraph 6 restricts deposit-taking NBFCs: those with NOF up to ₹50 crore or credit rating below AA can only open branches within their registered office state; those with NOF above ₹50 crore and AA rating or above can open anywhere in India. Subsections A2 and A3 (paragraphs 7-9) are deleted, and paragraphs 10 and 13 are updated to include/exclude CICs and HFCs appropriately.
What it means for you
This gives most NBFCs greater freedom to expand branches without seeking RBI approval each time, reducing compliance burden. For deposit-taking NBFCs, the rules remain tighter, linking branch expansion to financial strength (NOF) and credit rating, ensuring depositor protection. Lenders should review their NOF and credit rating to understand their branch expansion eligibility.
What you must do
- Review your NBFC's classification (deposit-taking or not) and check NOF and credit rating against the new thresholds.
- Update internal branch expansion policies to align with the new general permission for non-deposit-taking NBFCs.
- For deposit-taking NBFCs, ensure branch expansion plans comply with state-wise restrictions based on NOF and rating.
- Delete any obsolete procedures related to the removed subsections A2 and A3 from your compliance manuals.
Who it affects
All NBFCs registered with RBI (NBFC-D, NBFC-ICC, NBFC-Factor, NBFC-MFI, NBFC-IFC, IDF-NBFC, HFCs, CICs), Deposit-taking NBFCs and deposit-taking HFCs, Compliance and branch expansion teams of NBFCs
Do all NBFCs now have automatic permission to open branches anywhere?
No. Only non-deposit-taking NBFCs generally have automatic permission. Deposit-taking NBFCs must meet conditions: if NOF is up to ₹50 crore or credit rating below AA, they can only open branches within their registered office state; if NOF exceeds ₹50 crore and rating is AA or above, they can open anywhere in India.
What happens to the earlier branch authorisation procedures for NBFCs?
The earlier subsections A2 and A3 (paragraphs 7-9) have been deleted, simplifying the process. Most NBFCs no longer need prior RBI approval for branch openings, unless specifically restricted.
Are Housing Finance Companies (HFCs) and Core Investment Companies (CICs) covered under this amendment?
Yes. HFCs are explicitly included in the applicability list. CICs are covered for paragraphs 10, 13-15, and paragraph 10 now excludes CICs and HFCs from certain provisions, while paragraph 13 includes them.