Leading non-banking financial companies (NBFCs) are lobbying the Reserve Bank of India (RBI) to reconsider proposed restrictions prohibiting non-bank lenders from offering revolving credit facilities. Executives from major NBFCs gathered to formulate a formal representation through the Finance Industry Development Council (FIDC), the industry body representing the sector.
Background & Proposed Regulations
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Draft Circular Limits: In a draft amendment to the Credit Facilities Directions, the RBI proposed that NBFCs should strictly offer term loans with fixed principal amounts and pre-determined repayment schedules.
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Credit Restructuring: Under the proposed framework, once a principal loan amount is repaid, the credit line cannot be reinstated or replenished without a fresh loan evaluation.
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Exceptions: The prohibition excludes NBFCs explicitly authorized by the RBI to issue credit cards (such as SBI Card and BoB Cards).
Industry Concerns & Key Counter-Proposals
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Selective Restrictions vs. Blanket Ban: Lenders argue that a blanket prohibition on revolving credit disrupts critical non-retail products, such as working capital lines, supply chain finance, and secured lending facilities.
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Regulatory Intent: The RBI seeks to prevent high-risk, unsecured retail borrowing cycles (where borrowers draw down revolving funds to settle existing debts). However, NBFCs emphasize that legitimate commercial credit operations rely heavily on flexible drawing limits.
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Key Demands: The FIDC plans to urge the central bank to allow tailored exemptions—particularly for secured loans and supply chain financing—rather than enforcing a total ban across all non-card NBFC offerings.
