Lenders Law

The Reserve Bank of India (RBI) has issued the Draft Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026 (“ Draft Directions ”), inviting public comments by March 4, 2026 . The draft proposes a targeted recalibration of the NBFC regulatory framework , particularly for smaller, low-risk entities, by introducing a pathway for exemption from registration for select NBFCs. While the policy direction is clearly aligned with risk-based and proportional regulation , certain accompanying clarifications (FAQs) may require refinement to ensure that the intended relief is not diluted in practice. Key Proposals Under the Draft Directions: 1. Exemption From Registration for Select NBFCs: The Draft Directions propose that NBFCs meeting all of the following criteria may be exempt from registration under section 45-IA of the RBI Act, 1934: no acceptance of public funds ; no customer interface...

RBI’s recent supervisory reviews of NBFCs repeatedly highlight one area of non-compliance: Aadhaar misuse in KYC — especially accepting unmasked Aadhaar copies , failing to obtain mandatory consent , or performing unauthorised Aadhaar verification . On  9 December 2025 , UIDAI notified the  Aadhaar (Authentication and Offline Verification) Amendment Regulations, 2025  to amend the 2021 Regulations .  This blog summarises what NBFCs must do now — and what must immediately stop. Key Amendments: 1. New Definitions Introduced: (i) " Aadhaar Application" [Reg. 2(1)(ac)]-  UIDAI now defines authorised mobile/web applications — including mAadhaar, Aadhaar App, QR Scanner App, myAadhaar Portal — which alone may be used to perform offline Aadhaar verification. NBFC implication:  All offline Aadhaar verification must be done only through these UIDAI-approved apps/tools. (ii) "Aadhaar Verifiable Credential (AVC)"  [Reg. 2(1)(be)]-   A new digital do...

The Reserve Bank of India (RBI) recently cancelled  the Certificate of Registration (CoR) of four Non-Banking Financial Companies (NBFCs). While CoR cancellations are not routine, they are a powerful supervisory tool used when an NBFC fails to comply with prudential, regulatory, or governance requirements. This development has again placed the spotlight on Section 45-IA(6) of the Reserve Bank of India Act, 1934 , the statutory basis for cancellation of an NBFC’s CoR. What Does Section 45-IA(6) of the RBI Act Provide? Section 45-IA deals with registration requirements for NBFCs . Sub-section (6) empowers RBI to cancel an NBFC’s CoR if it fails to comply with essential conditions. RBI may cancel the CoR if the NBFC: Fails to comply with conditions of registration; Does not maintain the prescribed Net Owned Fund (NOF); Fails to submit statutory returns or documents; Operates in a manner that is prejudicial to public interest; Violates RBI directions, circulars, o...

One of the most common questions raised by founders, CFOs, legal teams, and compliance officers in Base-Layer NBFCs (NBFC-BL) is:  “Can we lend to the same category of borrowers at rates as low as 8% and as high as 30%?” The short answer is:  Yes — RBI permits flexibility, but not arbitrariness. NBFCs can vary pricing significantly provided the variation is justified through a transparent, risk-based framework approved by the Board. This article explains what RBI expects, how interest rates should be determined, and what practices can expose an NBFC to supervisory concerns. RBI’s Core Requirements for Base-Layer NBFCs Under the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025 , NBFCs must maintain: 1. A Board-Approved Interest Rate Policy: This policy must define: Internal methodology for setting interest rates; Risk-based pricing parameters; Rationale for deviations; Minimum and maximum rate bands; ...

  In the past year, the Reserve Bank of India (RBI) has imposed more than 100 monetary penalties on banks, NBFCs, fintechs, and cooperative institutions. These penalties span a wide range of compliance failures—from customer due diligence lapses to weak cyber security, and from outsourcing gaps to violations of lending norms. While the penalties differ in size, they all point to a common theme: regulatory compliance is non-negotiable . Here’s a breakdown of the most frequent reasons behind these actions. Category Typical Lapses Illustrative Orders Key Directions Change in management Failed to take prior written permission of the RBI before appointing a director Grewal Brothers Finance Company Private Limited (15 May, 2025) Mahindra Rural Housing Finance Limited (28 March, 2025) Habitat Micro Build Ind...

S. No. Policy Relevant Provision of Law Objective Remarks / Implementation Insights 1 Business Continuity Plan (BCP) & Disaster Recovery (DR) Policy Para 62, Reserve Bank of India (Non-Banking Financial Companies – Managing Risks in Outsourcing) Directions, 2025 Ensure uninterrupted business operations during disasters or cyberattacks. Ensure vendors follow recovery protocols; conduct regular mock drills and resilience testing. 2 Fair Practices Code Para 7, Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025 Promote transparency, ethical lending, and borrower protection. Use plain-language communications; disclose all charges upfront; avoid hidden clauses. ...

With the evolution of technology, the way of executing documents have also evolved. With the increasing demand for modern, convenient methods for entering into binding transactions, electronic agreements and electronic signature have gained a lot of momentum in recent years. Technological developments have not only changed the ways in which these transactions are entered into but the execution process has also revolutionised significantly. Speaking about e- agreements, while there has been various case laws, wherein email between parties has also been accepted as a binding contract, the validity and enforceability of click- wrap agreements still continues to be a cause of concern. RBI's Working Group on Digital Lending, in its recent report dated 18.11.2021, has made far reaching recommendations on digital lending. In this video, the expert will speak about implications of the report for industry players, and his learnings/ suggestions.