RBI liberalises branch rules for NBFCs, allows expansion without nod

RBI has eased branch expansion norms for NBFCs, allowing them to open branches without prior approval while retaining restrictions for weaker deposit-taking entities

The Reserve Bank of India (RBI) on Wednesday permitted non-banking financial companies (NBFCs) to open branches without seeking prior approval from the central bank, unless specifically restricted.

 

“The objective of these amended directions is to provide operational flexibility to NBFCs for branch expansion to facilitate ease of doing business while ensuring necessary regulatory compliance,” the central bank said.

 

Under the revised framework, NBFCs will generally be allowed to expand their branch network without prior approval, marking a departure from the earlier approach where certain categories required regulatory nod or prior intimation.

 

The RBI has retained a calibrated approach for deposit-taking NBFCs based on their financial strength and credit profile.

 

 

According to the directions, deposit-taking NBFCs with net owned funds (NOF) of up to Rs 50 crore or with a credit rating below AA can open branches or appoint agents only within the state where their registered office is located. Those with NOF above Rs 50 crore and a credit rating of AA or higher can open branches or appoint agents anywhere in India. NBFCs with NOF exceeding Rs 50 crore but with a rating below AA will be restricted to opening branches within their home state.

 

The central bank said the revised norms will come into force with immediate effect.

 

The RBI also modified provisions relating to core investment companies (CICs). Earlier, the RBI could advise a CIC to wind up its overseas representative office in case of non-compliance. The revised directions replace this with a mechanism to review or recall approvals granted for such offices, signalling a shift in the regulatory approach within the existing framework.