NBFCs can extend term loans, not revolving credit products: RBI draft norms

The RBI has proposed restricting NBFCs to term loans and barring revolving credit products, except for those authorised to issue credit cards

The Reserve Bank of India (RBI) on Thursday proposed allowing non-banking financial companies (NBFCs) to offer only term loans and discontinue revolving credit products, except for NBFCs authorised to issue credit cards.

 

In draft amendments to the Credit Facilities Directions for NBFCs, the regulator said NBFCs shall only offer credit products that are in the nature of term loans and shall not offer any revolving credit products. However, this restriction will not apply to NBFCs that are authorised to issue credit cards. There are only two NBFCs that offer credit cards — SBI Card and BoB Cards.

 

The draft norms define term loans as fund-based credit facilities of a fixed principal amount, where the sanctioned limit is disbursed in one or more instalments and is repayable in accordance with a predetermined amortisation schedule, either as periodic instalments or as a bullet payment.

 

 

"Once disbursed, the sanctioned limit cannot be restored/replenished upon repayment of either the whole or a part of the principal amount," the draft norms said.

 

Feedback on the proposed norms can be submitted until 28 August 2026.

 

The existing Credit Facilities Directions, issued in November 2025, lay down the prudential framework governing credit facilities extended by NBFCs. Through the latest draft amendments, the RBI has proposed distinguishing between term loans and revolving credit facilities and limiting the latter to credit card issuers authorised by the central bank. According to the draft directions, the amendments will "come into force immediately" once notified.