Lenders Law

 -  From Policy Intent to Enforceable Conduct Standards On 11 February 2026, the Reserve Bank of India released the   Draft Non-Banking Financial Companies – Responsible Business Conduct (Amendment) Directions, 2026  (“ Amendment Directions ”), effective from 1 July, 2026 . These amendments form part of the RBI’s broader effort to recalibrate conduct regulation for regulated entities, particularly in areas impacting customer protection, fairness and governance. Notably, the Amendment Directions flow directly from the policy intent articulated in  RBI’s Statement on Developmental and Regulatory Policies , released alongside the February 2026 Monetary Policy. The Amendment Directions therefore represent a deliberate regulatory progression rather than an isolated compliance update. Why Responsible Business Conduct Matters? The regulatory emphasis on conduct is rooted in persistent customer-level issues observed across the NBFC sector. Common themes emerging f...

India’s lending regulation is founded on a deliberate legal distinction:  the law regulates the “business of lending”, not every instance of lending . Accordingly: The Reserve Bank of India (RBI) regulates lending by Non-Banking Financial Companies (NBFCs) . State Governments regulate moneylenders under local Money Lending Acts. Yet, a significant and increasingly common practice now sits between these two regimes: Loans are advanced not by the NBFC, but by an individual promoter or by other group entities in which the promoter has a stake—often to borrowers who originally approached the NBFC itself. Such lending falls outside RBI regulation and outside State moneylender laws , creating a regulatory grey zone. Why RBI Regulation Does Not Extend to Individuals and Certain Group Entities? RBI’s powers under the RBI Act, 1934 extend only to entities carrying on the business of a non-banking financial institution . The 50–50 Test for NBFCs- An entity qualifies as an NBFC on...

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; ...