Guwahati: The Reserve Bank of India (RBI) has recommended the limitation of most non-banking financial companies (NBFCs) on providing revolving credit facilities, which will impact the variety of lending products that would be available through the sectors.
As per the draft amendments to the RBI (Non-Banking Financial Company) Directions, 2025, NBFCs would be able to provide only term loans in the future and not revolving credit facilities. This, however, wouldn't apply to NBFCs that are specifically authorized by the RBI to issue credit cards.
The draft proposes formal definitions of term loans and revolving credit. A term loan involves a fixed principal amount, disbursed either in a lump sum or in instalments, which is repaid according to a predetermined schedule. Once repaid, the sanctioned amount cannot be restored or reused.
The RBI has suggested to revise the existing provisions with a new section named ‘Restrictions on Revolving Credit Facilities’. The amendments, if notified as they are, would come into effect immediately.
The central bank has sought the public opinions and thoughts before the finalisation of the proposals but not specified any deadline for the submission of the comments.
The proposed changes seek to improve transparency and uniformity in the credit products that NBFCs provide and could require several lenders to redesign their existing products.