Draft RBI Directions on NBFC Lending to Related Parties – Key Highlights
Introduction: Why the RBI Proposed The Directions In recent years, concerns have intensified over governance lapses and concentration of exposures within related entities in the NBFC sector. Some NBFCs have been criticised for routinely granting favorable terms to promoter-related parties or renewing limits without adequate scrutiny—raising red flags about potential conflicts of interest, insider lending, and erosion of financial soundness. Moreover, as India’s financial architecture evolves, there is a drive to align NBFC regulatory norms with banking sector practices and draw lessons from corporate and securities regulations. The Reserve Bank of India (Non Banking Financial Company- Lending to Related Parties) Directions, 2025- Draft aims to bring similar discipline, transparency, and accountability to the non-banking lending space. By prescribing clear boundaries, independent oversight, and mandated reporting, the RBI seeks to preempt risks of moral hazard, reduce opac...