RBI Proposes Key Reforms to NBFC Registration & Exemption Framework (2026 Draft Directions)

 In a significant move impacting family offices and group investment / holding structures, the Reserve Bank of India (“RBI”) has introduced draft amendments to the regulatory framework governing Non-Banking Financial Companies (“NBFCs”).

The draft RBI (Non-Banking Financial Companies – Registration, Exemptions and Scale-Based Regulation) Amendment Directions, 2026 create a formal exemption pathway for certain internally funded, non-customer-facing entities a category that typically includes family offices, proprietary investment vehicles and group holding companies operating solely with owned funds.

Historically, even such entities were required to obtain registration under Section 45-IA of the RBI Act if they satisfied the principal business criteria (the 50-50 test), despite not accessing public funds or dealing with external customers. Recognising the limited systemic and customer protection risks posed by such structures, the RBI has now proposed a targeted exemption framework.

The key proposals are summarised below:

Particulars	Existing Framework	Proposed Changes (Draft Directions, 2026)
Mandatory Registration under Section 45-IA	Every company satisfying the “principal business criteria” (i.e., financial assets constituting more than 50% of total assets and income from financial assets constituting more than 50% of gross income – the 50-50 test)	Entities with no public funds, no customer interface, and total assets < ₹1,000 crore may be exempt from registration.
New NBFC Category	No specific recognition for non-customer-facing, self-funded financial entities.	Creation of Unregistered Type-I NBFCs category for low-risk entities that meet conditions.
Definition of ‘Public Funds’	Public funds generally include deposits and external finance.	Broadened to include amounts received from directors/shareholders and certain group sources, impacting eligibility for exemption.
Definition of ‘Customer Interface’	Relatively narrower; focused on external relationships.	Expanded to cover virtually all customer-oriented activities, including intra-group lending/guarantees, affecting NBFCs’ ability to qualify for exemption.
Governance & Compliance for Currently Exempt Entities	Not Applicable	Even exempt NBFCs must: (i) pass annual board resolutions reaffirming eligibility; (ii) disclose status in financial statements; and (iii) secure auditor certifications.
Deregistration Pathway	Not Applicable	Eligible existing NBFCs may apply for deregistration through the PRAVAH portal by 30 September 2026.

The draft Directions are targeted for implementation from 1 April 2026 (subject to final notification) and have been opened for public comments till 4 March 2026.

These proposed amendments represent a calibrated and pragmatic shift in the regulatory treatment of closely held investment structures. For family offices, proprietary investment vehicles and group holding companies operating exclusively with owned funds and without external customer interface, the introduction of the “Unregistered Type-I NBFC” category could significantly reduce regulatory burden and compliance costs. That said, careful evaluation of funding structures, intra-group arrangements and the expanded definitions of “public funds” and “customer interface” will be critical in determining eligibility for exemption.