Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Directions, 2025 (Updated as on July 01, 2026)

1. Other business for NBFCs

This document sets what other business the lender may take on.

2. In force at once

The rules took effect the day they were issued. There was no grace period.

3. Who is covered

These Directions apply to every non-banking financial company.

1. Policy must cover funds

The investment policy must carry provisions on investing in such funds.

BankPulse example. A lender that has never invested in such a fund still needs the words in its investment policy. The policy must carry provisions governing its investments in a scheme of that kind. Writing them only when the first investment is proposed is too late.

2. Ten per cent alone

A lender alone cannot put more than ten per cent into an alternative investment fund.

3. Twenty per cent from all

All regulated lenders together cannot hold more than twenty per cent of a fund.

4. Subordinated units deducted

A holding in subordinated units of such a fund is deducted from capital in full.

BankPulse example. A lender puts ₹10 crore into such a fund, as subordinated units. The whole ₹10 crore comes off capital funds. It is taken proportionately from Tier-1 and Tier-2 capital.

5. Some funds are exempt

The Reserve Bank may exempt named funds from these rules by notification.

1. Read with exchange rules

These rules are read together with the foreign exchange department's guidelines.

2. Approval to go abroad

Opening a subsidiary or joint venture abroad needs the Reserve Bank's prior approval.

3. Conditions on the no objection

A no objection is given only if the general and specific conditions are met.

4. Same rules for other holdings

Overseas holdings that are not subsidiaries follow the same rules as subsidiaries.

5. Investment company needs approval

A core investment company needs approval before a financial venture abroad.

6. Registration needed abroad

A core investment company investing abroad in finance must hold a registration.

7. Thirty days to report

An unregistered company must report such an investment within thirty days.

8. Net worth held after

The minimum net owned funds must still be met after the overseas investment.

9. Bad loans under one

Net bad loans must not exceed one per cent of net advances at the last balance sheet.

10. Three years of profit

The company should have earned a profit continuously for the last three years.

11. Nothing banned by law

Direct investment in activity forbidden by the exchange law is not allowed.

12. Four hundred per cent ceiling

Total overseas investment cannot exceed four hundred per cent of owned funds.

13. Two hundred in finance

Overseas investment in the financial sector cannot exceed two hundred per cent of its owned funds.

14. Only regulated firms abroad

Investment in the financial sector abroad must be in a regulated entity.

15. At most two tiers

Where a holding company is needed abroad, the structure cannot exceed two tiers.

16. Certificate by 30 April

The yearly certificate as at end March is due by 30 April.

17. Automatic route limits activity

A company taking foreign investment by the automatic route may do only permitted work.

18. Insurance entry through Pravaah

Entry into insurance business is applied for through the Pravaah portal.

19. Insurance not done in house

A finance company cannot carry on insurance business departmentally.

20. Higher stake sold down

A higher initial stake may be allowed but must be divested within the set period.

21. Tested on audited accounts

Eligibility is judged on the latest audited balance sheet for the previous year.

22. No forcing an insurer

The company cannot compel a customer towards one insurer on assets it finances.

23. Customer chooses

The customer must be left free to make his own choice.

24. Say it in publicity

All publicity material must state prominently that insurance is voluntary.

25. No link to lending

There must be no link, direct or indirect, between the loan and the insurance.

26. Premium goes direct

The premium is paid by the insured straight to the insurer, not through the lender.

27. Agency risk stays outside

Risk in the insurance agency work must not pass to the lending business.

28. Stake set by the regulator

The most a company may hold in the insurance venture is what the insurance regulator allows.

1. Old rules stay repealed

Rules repealed before this document was issued remain repealed.

2. Past acts still stand

Anything done under the old rules is still judged by the old rules.

3. Old approvals carry over

Approvals given under the repealed rules are now read under these rules.

4. Added to other law

These rules sit on top of every other law and rule already in force.