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Prior approvals from or intimations / reporting to RBI by NBFC-BL

Non-Banking Financial Companies (NBFCs) are required to obtain prior approvals from Reserve Bank of India (RBI) or intimate / report to RBI various events. This article lists out some of such important events where prior approvals or intimations / reporting is required for Base Layer NBFCs (NBFC-BL).

Events requiring prior approval from RBI 

Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023

  • Para 30 – NBFCs shall prepare its balance sheet and profit and loss account as on March 31 every year. Whenever an NBFC intends to extend the date of its balance sheet as per provisions of the Companies Act, 2013, it shall take prior approval of RBI before approaching the Registrar of Companies for this purpose. Even in cases where RBI and the Registrar of Companies grant extension of time, the NBFC shall furnish to RBI a proforma balance sheet (unaudited) as on March 31 of the year and the statutory returns due on the said date. 
  • Para 37.6 – NBFCs which are in the business of lending against collateral of gold jewellery, shall obtain prior approval of RBI to open branches exceeding 1,000. However, NBFCs which already have more than 1000 branches shall approach RBI for prior approval for any further branch expansion. 
  • Para 42.1.1 – An NBFC shall require prior written permission of RBI for the following –
    • Any takeover or acquisition of control of the NBFC, may or may not result in change of management.
    • Any change in the shareholding of the NBFC, including progressive increases over time, which would result in acquisition / transfer of shareholding of 26% or more of the paid-up equity capital of the NBFC. Prior approval would not be required in case of any shareholding going beyond 26% due to buyback of shares / reduction in capital where it has approval of a competent Court. However, the same is to be reported to RBI within 1 month from its occurrence.
    • Any change in the management of the NBFC which would result in change in more than 30% of the directors, excluding independent directors. Prior approval would not be required in case of directors who get re-elected on retirement by rotation.
  • Para 46.1 – Prior approval of RBI shall be obtained in cases of opening of branch / subsidiary / joint venture / representative office or undertaking investment abroad by NBFCs. 
  • Para 59.1 – For entry into insurance business, NBFCs shall make an application to the Regional Office of Department of Supervision of RBI in whose jurisdiction the registered office of the NBFCs is situated.
  • Para 122.2 – NBFC-ICC intending to undertake factoring business, shall make an application to RBI for grant of CoR under the Factoring Regulation Act, 2011.
  • Para 130 – NBFC-Factors or NBFC-ICCs which have been granted CoR under the Factoring Regulation Act, 2011, intending to deal in foreign exchange through export / import factoring, shall make an application to Foreign Exchange Department (FED) of RBI for necessary authorization to deal in foreign exchange.
  • Para 133.1 and 133.2 – NBFCs shall be eligible to sponsor (sponsorship as defined by SEBI Regulations for Mutual Funds) Infrastructure Debt Funds – Mutual Funds (IDF-MFs) with prior approval of Department of Regulation of RBI.
  • Para 2.2 of Annex II – Where impairment allowance under Ind AS 109 is lower than the provisioning required under Income Recognition, Asset Classification and Provisioning (IRACP) (including standard asset provisioning), NBFCs shall appropriate the difference from their net profit or loss after tax to a separate ‘Impairment Reserve’. No withdrawals shall be permitted from this reserve without prior permission from the Department of Supervision of RBI.
  • Para 1.6 of Annex XX – NBFC shall issue Perpetual Debt Instruments (PDI) as plain vanilla instruments only. However, they may issue PDI with a 'call option' subject to strict compliance with each of the following conditions – (i) That the instrument has run for minimum 10 years from the date of issue; and (ii) Call option shall be exercised only with the prior approval of RBI. 
  • Para 1.8.1 and 1.8.2 of Annex XX – NBFC may pay interest on PDI with the prior approval of RBI when the impact of such payment may result in net loss or increase the net loss, provided the Capital to Risk Assets Ratio (CRAR) remains above the regulatory norm.
  • Para 1.11.2 of Annex XX – NBFCs shall obtain prior approval of RBI, on a case-by-case basis, for investment by Foreign Institutional Investors (FIIs) / Non-Resident Indians (NRIs) in PDI to be raised by an NBFC in Indian Rupees.

Events which shall be intimated / reported to RBI 

Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023

  • Para 42.1.2 – NBFCs shall inform RBI regarding any change in their directors / management.
  • Para 44 – NBFCs shall communicate, within 1 month from the occurrence of any change in the following to the Regional Office of the Department of Supervision of RBI under whose jurisdiction it is registered.
    • The complete postal address, telephone numbers and fax numbers of the registered / corporate office.
    • The names and residential addresses of the directors of the company.
    • The names and the official designations of its principal officers.
    • The names and office address of the auditors of the company.
    • The specimen signatures of the officers authorised to sign on behalf of the company.
  • Para 54 – NBFCs can participate in the designated interest rate futures (IRF) exchanges recognized by SEBI, as clients, for the purpose of hedging their underlying exposures. NBFCs participating in IRF exchanges shall submit the data in this regard half yearly, in the prescribed format, to the Regional Office of the Department of Supervision of RBI in whose jurisdiction their company is registered, within 1 month from the close of the half year.
  • Para 73 – NBFCs with asset size of ₹100 crore and above shall furnish information about downgrading / upgrading of assigned rating of any financial product issued by them, within 15 days of such a change in rating, to the Regional Office of RBI under whose jurisdiction their registered office is functioning.
  • Para 1.1.2 of Annex IV – NBFC-Factors and non-deposit taking NBFCs of asset size of ₹500 crore and above, shall report to Central Repository of Information on Large Credits (CRILC), credit information on all the borrowers having aggregate fund-based and non-fund based exposure of ₹5 crore and above with them and the SMA status of the borrower.
  • Para 4.5 of Annex VI – The policy note recorded by the NBFCs on treatment of the investment portfolio for the purpose of Asset Liability Management (ALM) and approved by their Board / Asset-Liability Management Committee (ALCO) shall be forwarded to the Regional Office of the Department of Supervision of RBI under whose jurisdiction the registered office of the company is located.
  • Para 7.7 of Annex VI – The classification of various components of assets and liabilities into different time buckets for preparation of Gap reports (Liquidity and Interest Rate Sensitivity) as indicated in Appendices VI-A and VI-B is the benchmark. NBFCs which are better equipped to reasonably estimate the behavioural pattern of various components of assets and liabilities on the basis of past data / empirical studies could classify them in the appropriate time buckets, subject to approval from the ALCO / Board. A copy of the note approved by the ALCO / Board shall be sent to the Regional Office of the Department of Supervision of RBI under whose jurisdiction the registered office of the company is located. These notes may contain 'what if scenario' analysis under various assumed conditions and the contingency plans to face various adverse developments.
  • Para 5.6.5 of Annex XIII – In case of outsourcing of financial services by NBFCs, the NBFC shall immediately notify RBI in the event of any breach of security and leakage of confidential customer related information.
  • Para 1.8.1 and 1.8.4 of Annex XX – PDI shall be subjected to a lock-in clause in terms of which the issuing NBFC may defer the payment of interest, if – (i) Its Capital to Risk Assets Ratio (CRAR) is below the minimum regulatory requirement prescribed by RBI; or (ii) The impact of such payment results in NBFC’s CRAR falling below or remaining below the minimum regulatory requirement prescribed by RBI. All instances of invocation of the lock-in clause shall be notified by the issuing NBFC to the Regional Office of Department of Supervision of RBI in whose jurisdiction it is registered.
  • Para 2 of Annex XX – NBFC issuing PDI, shall submit a report to the Regional Office of Department of Supervision of RBI under whose jurisdiction it is registered giving details of the debt raised, including the terms of issue together with a copy of the offer document soon after the issue is completed.

Reserve Bank of India (Digital Lending) Directions, 2025 dated May 08, 2025

  • Para 17(i), 17(ii) and 17(vii) – Regulated Entity (RE) shall report all Digital Lending Apps / Platforms (DLAs) deployed / joined by them, whether their own or those of the Lending Service Provider (LSP), either exclusively or as a platform participant, on the Centralised Information Management System (CIMS) portal of RBI (in format given in Annex-I) by June 15, 2025. RE shall update the aforesaid list as and when additional DLAs are deployed or the engagement with the existing DLAs ceases to exist by filing the updated data in the CIMS portal.

Master Directions on Fraud Risk Management in Non-Banking Financial Companies (NBFCs) (including Housing Finance Companies) dated July 15, 2024 (applicable to NBFCs with asset size of ₹500 crore and above)

  • Para 6.2.1 – NBFCs shall furnish Fraud Monitoring Returns (FMRs) in individual fraud cases, irrespective of the amount involved, immediately but within 14 days from the date of classification of an incident / account as fraud.
  • Para 6.2.2 – Incidents of fraud at overseas branches of Indian NBFCs shall also be reported to the concerned overseas Law Enforcement Agencies (LEAs) in accordance with the relevant laws / regulations of the host countries.
  • Para 6.2.3 – NBFCs shall also report frauds perpetrated in their group entities to RBI separately, if such entities are not regulated / supervised by any financial sector regulatory / supervisory authority. However, in case of overseas financial group entity of Indian NBFC, the parent NBFC shall also report incidents of fraud to RBI. 
  • Para 7.2 – NBFCs shall complete the investigation from fraud angle before transferring the loan account / credit facility to other lenders / Asset Reconstruction Companies (ARCs). In cases where NBFCs conclude that a fraud has been perpetrated in the account, they shall report it to RBI before selling the accounts to other lenders / ARCs. In cases where accounts are sold to ARCs, NBFCs shall continue to report subsequent developments in such accounts to RBI, by obtaining requisite information periodically from the concerned ARCs.
  • Para 8.1 – NBFCs shall report instances of theft, burglary, dacoity and robbery (including attempted cases), to Fraud Monitoring Group (FMG), Department of Supervision, Central Office, RBI, immediately (within 7 days) from their occurrence.
  • Para 8.2 – NBFCs shall submit a quarterly return (RBR) on theft, burglary, dacoity and robbery to RBI using online portal, covering all such cases during the quarter, within 15 days from the end of the quarter to which it relates.

Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 dated September 24, 2021

  • Para 32(g) – An originator should notify RBI (Department of Supervision) of all instances where it has agreed to replace assets sold to special purpose entity (SPE) or pay damages arising out of any representation or warranty. 
  • Para 118 – The originator must submit the details of the securitisation transactions undertaken, including the details of the securitisation notes issued, to RBI on a quarterly basis. 

Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 dated September 24, 2021

  • Para 21 – A transferor should notify RBI (Department of Supervision) of all instances where it has replaced loans transferred to a transferee or paid damages arising out of any representation or warranty.

Master Direction - Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017 dated October 04, 2017

  • Para 14(4) – Information System Audit of the internal systems and processes shall be in place and shall be conducted at least once in 2 years by CISA certified external auditors. Report of the external auditor shall be submitted to the Regional Office of the Department of Supervision of RBI, under whose jurisdiction the Registered Office of the NBFC-Peer to Peer Lending (NBFC-P2P) is located, within 1 month of submission of the report by the external auditor.
  • Para 19(2) – The following quarterly statements shall be submitted to the Regional Office of RBI within 15 days after the quarter to which these relate.
    • A statement, showing the number and amount in respect of loans - (a) disbursed during the quarter (b) closed during the quarter (c) outstanding at the beginning and at the end of the quarter, including the number of lenders and borrowers outstanding as at the end of the quarter
    • The amount of funds held in the Escrow Account, bifurcated into funds received from lenders and funds received from borrowers, with credit and debit summations for the quarter.
    • Number of complaints outstanding at beginning and at end of quarter, and disposed of during the quarter, bifurcated as received from – (a) lenders and (b) borrowers.
    • Leverage Ratio, with details of its numerator and denominator.

Master Direction - Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016 dated September 02, 2016

  • Para 8(f) – Information System Audit of the internal systems and processes shall be in place and shall be conducted at least once in 2 years by CISA certified external auditors. Report of the external auditor shall be submitted to the Regional Office of the Department of Supervision of RBI, under whose jurisdiction the Registered Office of the Account Aggregator is located, within 1 month of submission of the report by the external auditor.


References

Reserve Bank of India. (2016, September 02). 'Master Direction- Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016 (Updated as on September 06, 2024)'. Retrieved from https://website.rbi.org.in/en/web/rbi/-/notifications/master-direction-non-banking-financial-company-account-aggregator-reserve-bank-directions-2016-updated-as-on-december-29-2022-10598

Reserve Bank of India. (2017, October 04). 'Master Direction - Non-Banking Financial Company - Peer to Peer Lending Platform (Reserve Bank) Directions, 2017 (Updated as on February 27, 2025)'. Retrieved from https://website.rbi.org.in/web/rbi/-/notifications/master-directions-non-banking-financial-company-peer-to-peer-lending-platform-reserve-bank-directions-2017-updated-as-on-december-29-2022-11137

Reserve Bank of India. (2021, September 24). 'Master Direction - Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 (Updated as on December 05, 2022)'. Retrieved from https://website.rbi.org.in/web/rbi/-/notifications/master-direction-reserve-bank-of-india-securitisation-of-standard-assets-directions-2021-updated-as-on-december-05-2022-12165

Reserve Bank of India. (2021, September 24). 'Master Direction - Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 (Updated as on December 28, 2023)'. Retrieved from https://website.rbi.org.in/web/rbi/-/notifications/master-direction-reserve-bank-of-india-transfer-of-loan-exposures-directions-2021-updated-as-on-december-05-2022-12166

Reserve Bank of India. (2023, October 19). 'Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 (Updated as on February 27, 2025)'. Retrieved from https://website.rbi.org.in/web/rbi/-/notifications/master-direction-reserve-bank-of-india-non-banking-financial-copany-scale-based-regulation-directions-2023

Reserve Bank of India. (2024, July 15). 'Master Directions on Fraud Risk Management in Non-Banking Financial Companies (NBFCs) (including Housing Finance Companies)'. Retrieved from https://website.rbi.org.in/web/rbi/-/notifications/master-directions-fraud-risk-management-in-non-banking-financial-companies-nbfcs-including-housing-finance-companies-


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