RBI plans to let small NBFCs go unregistered; here’s who qualifies and who doesn’t

The Reserve Bank of India (RBI) has proposed to exempt certain non-deposit taking non-banking financial companies (NBFCs) from mandatory registration, and classify them as Type-I NBFCs with an aim to reduce compliance requirements.

In a draft circular, the central bank said NBFCs that do not avail public funds, have no customer interface and have an asset size of less than ₹1,000 crore will be exempted from the registration requirement from April 1, 2026.

"....(such NBFCs) are exempted from the provisions of section 45IA of the RBI Act, 1934 in terms of paragraph 66A of these Directions w.e.f. April 01, 2026," said the draft Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026.

In an 'FAQ' on the subject, RBI said such entities will be categorised as “Type I NBFCs”, while all other registered NBFCs will fall under “Type II NBFCs”.

Existing NBFCs meeting the exemption criteria, including those currently holding a certificate of registration as Type I NBFCs, may apply for deregistration within six months of the rules coming into force.

However, NBFCs with assets of ₹1,000 crore or more, even if they do not raise public funds or have customer interface, will be required to mandatorily seek registration as Type I NBFCs.

The central bank clarified that any exempt entity found availing public funds or engaging with customers would be in violation of the exemption conditions and must seek prior registration as a Type II NBFC to avoid penal action.

Unregistered Type I NBFCs will be required to pass annual board resolutions confirming this status and disclose it in their financial statements.

As per extant norms, NBFCs are categorised as 'base layer', 'middle-layer', 'upper layer' and 'top layer' on basis of asset size.

Currently, NBFCs that do not avail public funds and do not have any customer interface are categorised as base layer NBFCs.

RBI has sought stakeholders comments on the draft directions by March 4.