RBI Introduces Targeted Exemption for Select NBFCs under SBR Framework

The Reserve Bank of India (RBI), vide its Circular dated April 29, 2026, has issued the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026 (the “Amendment Directions”), introducing a targeted regulatory exemption within the framework of the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025 (the “Principal Directions”). The Amendment Directions will come into force on July 1, 2026.

The Amendment Directions introduce a narrowly defined exemption for a specific category of non-deposit taking NBFCs that (i) do not avail public funds, (ii) do not have any customer interface, and (iii) have an asset size of less than ₹1,000 crore as per their latest audited financial statements. Such entities are exempted from the applicability of Sections 45-IA and 45-IC of the Reserve Bank of India Act, 1934, which respectively require compulsory registration with the RBI and the creation of a statutory reserve fund.

This exemption must be viewed in the context of the broader Scale Based Regulation (SBR) framework, which classifies NBFCs based on size, activity and systemic importance. While the Amendment Directions operate within this risk-based approach, the exemption itself is conditional and limited to entities that follow a business model without access to public funds and without customer-facing operations.

The Amendment Directions also provide a transition pathway for existing NBFCs meeting the prescribed criteria. Such entities, including those currently holding a Certificate of Registration (CoR) as Type I NBFCs, may apply to the RBI for deregistration within a period of six months, i.e., on or before December 31, 2026. Applications are required to be made through the PRAVAAH portal and must be supported by prescribed documentation, including audited financial statements, auditor certifications, and board resolutions confirming the absence of public funds and customer interface.

The exemption is subject to ongoing compliance conditions. Eligible entities are required to maintain their status as non-public fund NBFCs without customer interface, make appropriate disclosures in the notes to their financial statements, and ensure that their statutory auditors report any deviation from these conditions to the RBI. In addition, where multiple such entities exist within a group, their asset sizes are required to be aggregated for determining eligibility under the ₹1,000 crore threshold.

It is also clarified that the exemption is limited to Sections 45-IA and 45-IC of the RBI Act, 1934, and such entities continue to remain subject to other applicable provisions of the Act. The RBI retains supervisory and enforcement powers, including the ability to take action in case of non-compliance.