Reserve Bank of India (Non-Operative Financial Holding Companies) Directions, 2025 (Updated as on December 05, 2025)
UR
- Applies toNon-Operative Financial Holding Companies (NOFHCs)
- StatusIn force
- IssuedNov 28, 2025
- Last amendedApr 27, 2026 · 1 incorporated
- Length45 points in 4 sections · 5 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNov 28, 2025The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| 51 per cent | Promoters must own at least 51 per cent of the NOFHC's paid-up equity capital. RBI Para 8 |
| 15 per cent | A single promoter individual's own stake cannot exceed 15 per cent of the NOFHC's paid-up capital. RBI Para 12 |
| 49 per cent | Non-promoters together may hold no more than 49 per cent of the NOFHC's voting shares. RBI Para 12 |
| 10 per cent | A single non-promoter shareholder's own stake cannot exceed 10 per cent of the NOFHC. RBI Para 12 |
| 25 per cent | The NOFHC must send at least 25 per cent of its annual profit to a reserve fund. RBI Para 22 |
| 20 per cent | The bank's outside equity investments together cannot exceed 20 per cent of its own capital and reserves. RBI Para 41 |
| three years | The NOFHC cannot start any new financial services business for three years after it begins. RBI Para 43 |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Can be read two ways
A point marked this way sits on an RBI paragraph that can honestly be read two ways. Our own sentence takes one of the two. BankPulse does not choose for you: read RBI’s own paragraph, at the number printed on the point, before you act on it.
Two ways — both, or either one. RBI’s paragraph joins two things in the and-or form. One reading: Both of them apply, together. The other: Either one of them, on its own, is enough.
Chapter I. Preliminary
1. Rules apply immediately
These rules took effect the day RBI issued them.
2. Applies to every NOFHC
These rules apply to every Non-Operative Financial Holding Company.
3. What an NOFHC is
An NOFHC is a non-deposit taking NBFC that holds the bank and the group's other financial companies.
Chapter II. Registration, Regulatory Structure and Shareholding
Must know
1. Registers with RBI as NBFC
An NOFHC must register with RBI as a non-banking financial company.
2. Bank approval needed first
A company needs RBI's in-principle bank approval before it can register as an NOFHC.
3. Promoters hold 51 per cent
Promoters must own at least 51 per cent of the NOFHC's paid-up equity capital.
4. Only certain owners allowed
Only individuals, non-financial companies and Core Investment Companies in the group may hold NOFHC shares.
5. Voting shares: 51 per cent
Promoters and group companies must hold at least 51 per cent of the NOFHC's voting equity shares.
6. Promoter cap 15 per cent
A single promoter individual's own stake cannot exceed 15 per cent of the NOFHC's paid-up capital.
7. Non-promoter cap: 49 per cent
Non-promoters together may hold no more than 49 per cent of the NOFHC's voting shares.
8. Outsider cap 10 per cent
A single non-promoter shareholder's own stake cannot exceed 10 per cent of the NOFHC.
9. No outside shareholder gets control
No shareholder other than the promoter group may have significant influence or control in the NOFHC.
10. LLPs and trusts hold indirectly
An LLP or trust cannot hold NOFHC shares directly, only through a group company.
11. Invest through the NOFHC only
Promoters may hold equity in the bank and group financial firms only through the NOFHC.
Do it
12. Report large share moves
Any NOFHC shareholding change of 5 per cent or more must be reported to RBI.
Background
13. Always in the Base Layer
An NOFHC always sits in the Base Layer of RBI's regulatory structure.
14. Why an NOFHC exists
RBI wants the NOFHC to ring-fence the bank and the group's other regulated firms from each other.
15. Only RBI-favoured entities held
Only financial firms the promoter genuinely controls may sit under the NOFHC.
16. Group firms can't own NOFHC
The financial companies the NOFHC holds cannot themselves be shareholders in the NOFHC.
Chapter III. Corporate Governance of NOFHC
1. One director, no other NOFHC
No NOFHC director may also sit on the board of another NOFHC or bank.
2. Half the board stays independent
At least half the NOFHC's directors must be independent of the promoter group.
3. Directors get a fitness check
The NOFHC must run due diligence on a director's suitability before appointing them.
4. A Nomination Committee is required
The NOFHC must have a Nomination Committee to vet its own directors.
5. A Remuneration Committee sets pay
A Remuneration Committee decides what the NOFHC pays its key executives.
Chapter IV. Prudential Norms for the NOFHC
Must know
1. Profit share goes to reserves
The NOFHC must send at least 25 per cent of its annual profit to a reserve fund.
2. Dividend needs a clean audit
A dividend can be paid only if the auditors raise no serious qualification hurting profit.
3. Leverage capped at 1.25 times
The NOFHC's leverage may not exceed 1.25 times its paid-up capital and free reserves.
4. No exposure to own group
The NOFHC may take no credit or investment exposure to its own promoter group.
5. No exposure outside the group
The NOFHC cannot take equity, debt or credit exposure to any entity outside its own group.
6. Cap on money outside group
The consolidated NOFHC's investment outside its own group cannot exceed 10 per cent of its capital funds.
7. Bank barred from NOFHC firms
The bank may not invest in the capital instruments of financial firms the NOFHC holds.
8. Bank barred from other NOFHCs
The bank cannot invest in the equity of any other NOFHC.
9. Cap on bank's outside equity
The bank's outside equity investments together cannot exceed 20 per cent of its own capital and reserves.
10. Group firms can't fund others
Financial firms under the NOFHC cannot invest in each other's equity or debt instruments.
Chapter V. Non-Permitted Activities of an NOFHC
Must know
1. Three-year ban on new business
The NOFHC cannot start any new financial services business for three years after it begins.
2. Core banking stays in bank
Every activity a bank may do under law should run from the bank itself.
3. Some businesses need a subsidiary
Mutual fund, insurance, pension and broking businesses can run only through a separate subsidiary or joint venture.
4. Other new business needs approval
Any other new business by a group entity needs RBI's prior approval first.
5. Can't own group's physical assets
The NOFHC cannot hold the group's physical assets and charge the group for using them.
6. No advisory services allowed
The NOFHC cannot offer advisory services to any entity inside or outside the group.
7. Unregulated group firms stay out
A group financial firm with no regulator of its own cannot be placed under the NOFHC.
Do it
8. Tell RBI within 15 days
The NOFHC must tell RBI within 15 days of its Board deciding to start such a business.
Chapter VI. Consolidated Supervision
1. RBI supervises the whole group
RBI supervises the bank, the NOFHC and its group entities together, on a consolidated basis.
Chapter VII. Repeal and Other Provisions
1. RBI's word is final
RBI's own reading of these rules is treated as final and binding.
2. RBI may grant exemptions
RBI may excuse an NOFHC from any of these rules for good reason.
How this rule has changed
The points above are the rule as it stands today, after every change listed here.
Issued on Nov 28, 2025. This is the date RBI put the rule out.
Changed on Apr 27, 2026.
- Amendment directions. These are amendment rules for non operative financial holding companies.
- Para 20 modified. Paragraph 20 now links to prudential norms on income, assets and provisions for advances.
- Start date. These amendment rules will start from April 01, 2027.