Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025 (Updated as on July 01, 2026)
UR
- Applies toFinance companies
- StatusIn force
- ImportanceMUST READ
- IssuedNov 28, 2025
- Last amendedJun 16, 2026 · 3 incorporated
- Length42 points in 5 sections · 4 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
Kept in your browser only. Your desk
Show me the points for
Nothing is removed from the page.
Show me the points about
41 of the 42 points name no product and bind every product. All products.
Numbers to remember
| ten per cent | Of that, at least ten per cent of risk weighted assets must be Tier 1. RBI Para 6(2) |
| fifteen per cent | A finance company in the middle layer or above must hold fifteen per cent capital. RBI Para 6(3) |
| nine per cent | An upper layer company must also hold nine per cent common equity Tier 1. RBI Para 6(4) |
| twenty per cent | Exposure to the Indian clearing corporation weighs twenty per cent, others fifty. RBI Para 18(7) |
| 10 per cent | A clean-up call cannot become exercisable above 10 per cent of the original pool. RBI Para 27(8) |
What it says
Chapter I. Preliminary
1. Capital rules for finance firms
This document sets how much capital non-banking financial companies must hold.
2. Start date
These Directions took effect on the day RBI issued them.
BankPulse example. There is no gap here between issue and effect. The Directions come into effect immediately upon issuance. A bank cannot wait for a separate start date, because there is none.
3. In force at once
The rules took effect the day they were issued. There was no grace period.
4. Who is covered
These Directions apply to every non-banking financial company.
Chapter II. Regulatory capital
Must know
1. Ten per cent core
Of that, at least ten per cent of risk weighted assets must be Tier 1.
2. Fifteen per cent floor
A finance company in the middle layer or above must hold fifteen per cent capital.
3. Upper layer holds nine
An upper layer company must also hold nine per cent common equity Tier 1.
4. Base layer bars this paper
A base layer company cannot count perpetual debt in its Tier 1 capital.
5. Step up capped
A step up in the rate cannot exceed one hundred basis points.
6. Gains do not offset
A gain in one category cannot be set against a loss in another.
7. Leverage capped at seven
A base layer company's leverage ratio cannot exceed seven at any time.
Do it
8. Other regulators still apply
Conditions set by the market regulator or any other authority must also be met.
9. Investor decides alone
The offer document must say the Reserve Bank takes no responsibility for repayment.
10. Board must ensure compliance
The Board must make sure every one of these conditions is met.
Background
11. Gold lenders hold more
A company lending mainly against gold jewellery has its own capital floors.
12. Top layer pays more
A company in the top layer faces a higher capital charge set for it alone.
13. Told at classification
The higher requirement is told to the company when it is put in the top layer.
14. Goodwill is removed
Goodwill and every other intangible asset are deducted from core capital.
15. Losses are removed
Losses of this period and earlier periods are deducted from core capital.
16. Excess deferred tax stays out
A deferred tax liability above the asset is neither adjusted nor added back.
17. Right of use stays
A right of use asset over a tangible asset need not be deducted.
18. Enhancement splits the tiers
Half of a credit enhancement given comes off Tier 1 and half off Tier 2.
Chapter III. Risk Weight Assets (RWAs)
Must know
1. Charge has a ceiling
The capital charge cannot exceed what the exposure would cost if it had no guarantee.
2. Enhancement charge capped
The capital on a credit enhancement cannot exceed the enhancement itself.
3. Clearing house weights
Exposure to the Indian clearing corporation weighs twenty per cent, others fifty.
4. Walkaway deals not netted
A contract with a walkaway clause cannot be netted when capital is worked out.
5. Originator cannot buy back
The originator cannot repurchase transferred exposures except through a clean up call.
6. Clean up call is optional
A clean up call can never be made compulsory on the originator.
7. No hidden support
A clean up call cannot be built so as to give hidden credit support.
8. Clean-up call limit
A clean-up call cannot become exercisable above 10 per cent of the original pool.
BankPulse example. Suppose the pool started at ₹500 crore. A clean-up call may become exercisable once the pool falls to 10 per cent of that. That is ₹50 crore. It may not be set to trigger while ₹80 crore is still outstanding.
Do it
9. Full capital below grade
If the bond's rating falls below investment grade, full capital must be held.
Background
10. Weights multiply the assets
Each balance sheet item is multiplied by its risk weight to get its value.
11. Deducted assets weigh nil
An asset already deducted from owned funds carries a zero risk weight.
12. Cash margin comes off
Cash margins and deposits are deducted before the conversion factor is applied.
13. Some swaps are exempt
No future exposure is worked out on single currency floating to floating swaps.
14. Use the effective amount
Future exposure is based on the effective, not the stated, notional amount.
15. Netting needs agreement
Netting is recognised only where the stated conditions are met.
16. Repurchase stays retained
A securitisation exposure bought back is treated as retained, not fresh.
Chapter VI. Repeal and Other Provisions
1. Old rules stay repealed
Rules repealed before this document was issued remain repealed.
2. Old actions preserved
Anything already done under the old rules stays governed by those old rules.
3. Approvals carried over
Approvals given under the cancelled rules are now treated as given under these rules.
4. Other laws still apply
These Directions add to other laws. They do not replace any of them.
BankPulse example. A bank follows these Directions and thinks the matter is closed. It is not. Any other laws, rules, regulations or directions in force still apply on top. Where another one asks for more, the bank does the more.
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 Jan 01, 2026.
- How to test repayment. Non bank finance companies must test the repayment level on the full sanctioned project debt for these infra loans.
- Club extra project debt. Any extra debt for takeover or otherwise must be clubbed with old project loans when checking the repayment threshold.
Changed on Mar 10, 2026.
- Immediate effect. The amendment rules take effect at once from their issue date.
- Quarterly profit review. Quarterly financial results must be reviewed or audited by statutory auditors.
- Reduce profits for dividend. Quarterly profits counted for capital must be cut by average dividend of the last three years.
- Current year losses. Losses in the current year must be fully taken out from owned fund.
Changed on Jun 16, 2026.
- Remaining exposure weight. For the remaining part of such exposure, use risk weight that current rules already say.
- Immediate effect. These changes start working at once from the date of this direction.
The same subject for other kinds of institution
The same subject for other kinds of institution.
Other RBI rules for NBFCs
Every rule page on BankPulse · Questions bankers ask, answered