In draft amendments to the Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025, released for public comments, the central bank has proposed that NBFCs should offer only term loan products and should not provide revolving credit facilities.
Under the proposal, the restriction would not apply to NBFCs that have been specifically authorised by the RBI to issue credit cards.
The draft amendments also introduce formal definitions for “term loan” and “revolving credit” for the first time under these directions.
A term loan has been defined as a fund-based credit facility with a fixed principal amount, where the sanctioned limit is disbursed in one or more instalments and repaid according to a predetermined repayment schedule. The proposal also specifies that once the principal is repaid, the sanctioned limit cannot be restored or replenished.
In contrast, revolving credit has been defined as any fund-based credit facility that does not meet the definition of a term loan.
As part of the proposed changes, the RBI has also suggested deleting an existing provision under Chapter II of the 2025 directions, as well as removing the chapter dealing with “Demand/Call Loans”. In its place, it has proposed a new section titled “Restrictions on Revolving Credit Facilities.”
The proposed new provision states that an NBFC “shall only offer credit products which are in the nature of term loans and shall not offer any revolving credit products.” However, it adds that this restriction will not apply to NBFCs authorised by the RBI to issue credit cards.
If notified in its current form, the amendment would take effect immediately, according to the draft notification.
The RBI has issued the proposal as a draft for public comments before finalising the amendments. The draft notification does not specify the last date for submitting comments in the text released.
