RBI moves to restrict NBFCs to fixed-term loans, allowing credit cards only for authorised lenders

The Reserve Bank of India has proposed new regulations limiting non-banking financial companies to offer only fixed-term loans, narrowing the scope for revolving credit products and tightening control over credit card issuance.

The Reserve Bank of India has proposed a sharp tightening of how non-banking financial companies can structure lending, moving to bar them from offering revolving credit products while allowing only term loans, except for lenders that are authorised to issue credit cards.

In draft amendments to its Credit Facilities Directions for NBFCs, the central bank said such firms should extend credit only as fixed-sum loans with a set repayment schedule. Under the proposal, once the money is drawn, the approved limit could not be restored as the borrower repays part or all of the principal. The restriction would not apply to the small group of NBFCs permitted to issue credit cards, including SBI Card and BoB Cards, according to the draft.

The RBI said term loans would be defined as fund-based credit facilities with a fixed principal amount, disbursed in one or more instalments and repaid through a predetermined amortisation plan, either in regular instalments or through a bullet payment at maturity. The draft says the changes would take effect immediately once notified, and the regulator is accepting public feedback until 28 August 2026.

The move builds on the prudential framework the RBI put in place in November 2025, and it comes against a wider backdrop of tighter oversight of NBFC activity in retail credit. Industry guidance noted by other publications says NBFCs generally need prior approval and, in some cases, a minimum net owned fund of ₹100 crore to enter the card business, either directly or through co-branded arrangements with banks. The latest draft would leave that card-issuing lane open, but only for the entities already cleared to operate in it.