The Reserve Bank of India’s proposed restrictions on revolving credit could force NBFCs to shift towards term loans, potentially impacting customer access to flexible borrowing options amid intensified regulatory scrutiny and tighter lending controls.
The Reserve Bank of India’s planned restrictions on revolving credit could force non-banking financial companies to lean more heavily on term loans, a shift that would reduce the kind of reusable borrowing lines many customers have come to rely on. Flexi loans, overdraft-style facilities and other repeat-draw products are likely to be caught in the sweep, with lenders such as Bajaj Finance and Tata Capital potentially among the most exposed.
According to Business Standard, the central bank has already signalled concern that perpetual credit lines can obscure a borrower’s true repayment capacity and create the risk of evergreening, where fresh lending masks underlying stress. That worry fits a broader tightening cycle. The RBI has also moved to curb lending to defaulting borrowers unless a board-approved policy is in place, underscoring a push for clearer controls and more disciplined underwriting.
The effect on borrowers could be immediate. Once a revolving line is repaid, customers may have to go through a fresh approval process before drawing again, adding friction and making credit less flexible. Some demand could migrate towards credit cards and banks, while NBFCs with large revolving-credit books may see pressure on repeat borrowing, customer acquisition and fee income if the final rules mirror the current direction of travel.
The clampdown also comes as RBI scrutiny of consumer credit remains intense. Mint reported that fintech lending has slowed after tighter oversight of unsecured products, even as delinquency rates remain stubbornly high, especially in smaller-ticket loans. Separately, lenders are moving towards weekly bureau reporting to close information gaps, and the RBI has also tightened rules around default loss guarantees on fintech-sourced loans, all part of a wider effort to make consumer lending more transparent and less vulnerable to stress.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
