The Reserve Bank of India (RBI) has issued a draft proposing that non-banking financial companies (NBFCs) restrict their offerings to term loans, phasing out revolving credit products. This regulatory change aims to standardize credit facilities across the sector. While credit card issuers remain exempt, other NBFCs may need to restructure their product portfolios, making the final notification a key event for investors to track.
The Reserve Bank of India (RBI) has introduced a draft proposal that could significantly change how non-banking financial companies (NBFCs) lend money to customers. Released on August 6, 2026, the proposal suggests that these financial companies should be limited to offering only term loans. This means revolving credit products, where customers can use, repay, and reuse a credit limit, would no longer be permitted for most NBFCs.
The regulatory shift is designed to create a clear definition of credit facilities in the sector. Under the proposed rules, a term loan is defined as a fixed amount of money that is borrowed and then repaid in a set schedule of installments. Crucially, once the loan is disbursed and repayment begins, the customer cannot replenish or reuse the limit. This removes the flexibility typically found in credit lines or overdraft-style products that some NBFCs currently offer.
There is a specific exemption for companies that hold a license to issue credit cards, such as entities like SBI Cards and BoB Cards. These companies will continue to operate their credit card businesses as usual, as the revolving nature of credit cards is inherent to their product design. For other NBFCs, especially those focused on personal loans or digital lending apps that use revolving credit structures, this could mean a necessary adjustment in how they package their loan products.
For investors, the potential impact lies in the operational and compliance changes these companies might face. If an NBFC relies heavily on revolving credit-like products to generate business, they may need to restructure these offerings to fit the term loan model. This could influence how they acquire customers, manage liquidity, and report loan volumes. There could be additional costs involved in updating systems and product documentation to meet the new standards once they are finalized.
The RBI has invited public comments on these draft norms until August 28, 2026. Since the rules are expected to come into force immediately after the final notification is issued, market participants will be watching for the final version of the guidelines. Investors should track management commentary from NBFCs in the coming weeks to understand if their current loan products will be affected and how they plan to adapt to the proposed definitions.