RBI
RBI: NBFC Revolving Credit Ban Was Never Permitted, Clarification Not New Rule
7 October 2026 · Mint
RBI Governor Sanjay Malhotra clarified that the draft circular barring NBFCs from offering revolving credit is not a new rule, as such products were never permitted. Feedback on the draft is being examined and final norms may differ.
Points to Remember
- RBI Governor Sanjay Malhotra said at the post-monetary policy conference that the draft circular on NBFC revolving credit is a clarification, not a new rule or law.
- The draft circular (released 6 August) proposed limiting NBFC lending strictly to term loans, effectively barring revolving credit facilities like flexi-loans; feedback deadline was 28 August.
- NBFCs sought clarity on definition of revolving credit and exemptions for MSME-focused products like supply-chain finance and invoice discounting.
- RBI aims to mitigate systemic stability risks, prevent loan evergreening, and address NBFC liquidity vulnerabilities; final directions will consider systemic liquidity risks and funding needs.
- NBFC credit grew 15.8% YoY in August; bank non-food credit rose 18.8% YoY, with bank lending to NBFCs up 37.5% YoY. RBI sees no current asset quality concerns for NBFCs.
Why it matters
NBFCs may need to redesign their lending products, so understanding the distinction between term loans and revolving credit can help you handle customer queries and assess counterparty risks.
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