RBI Moves to Simplify NBFC Group Structures to Reduce System Risks

RBI asked major financial groups in early December 2025 to unwind complex NBFC chains, The Economic Times reported, aiming to curb rising structural risks and improve supervision.

The direction comes at a crucial moment for India’s credit markets. NBFCs are becoming increasingly important in driving consumption lending, but many large groups operate multiple NBFCs with overlapping functions. The central bank believes such structures weaken transparency and heighten contagion risks. 

Strengthening RBI NBFC regulations is therefore central to improving accountability and tightening NBFC group structure norms for major conglomerates.

How RBI’s New Framework Tightens Rules for NBFC Groups?

According to officials cited in The Economic Times on 8 December 2025, RBI has informally instructed several corporate groups to consolidate or shut redundant NBFCs. 

Read More – Good News for NBFCs and Infrastructure Loan Borrowers

This follows its updated regulatory direction under the Master Direction – Reserve Bank of India (Regulatory Framework for NBFCs) issued on 5 December 2025, via Notification No. RBI/DOR/2025-26/138DOR.RAUG.AUT.REC.No.343/24.01.041/2025-26, available under:
RBI.org.in → Notifications → NBFC Regulations → Master Directions

Under these strengthened RBI NBFC regulations, groups must:
 

A recent 2025 LoansJagat analysis noted that NBFC conglomerates with several financing arms face higher scrutiny as sector borrowing rises.

RBI has also clarified that NBFCs under the same group must adhere to uniform capital, liquidity and governance norms, limiting regulatory arbitrage commonly seen in earlier years.

How Earlier Policies Created the Road to These New Reforms?

NBFC complexity has grown sharply since the mid-2010s, with several conglomerates launching multiple NBFCs to diversify portfolios or navigate gaps in older rules. The 2018 IL&FS collapse exposed how hidden group exposures across NBFCs could destabilise the entire system.

In response, RBI introduced the Scale-Based Regulation (SBR) in October 2023 under the Master Direction – NBFC – SBR Directions, 2023 (DoR.FIN.REC.No.45/03.10.119/2023-24).

SBR classified NBFCs into layers and imposed tougher governance on Upper-Layer NBFCs. This became the foundation for modern NBFC group structure norms.

Also Read – RBI Plans New Relaxations for NBFC Infrastructure Loans

Next, in October 2024, RBI released a proposal restricting banks and their NBFC subsidiaries from offering the same loan products unless they had board-approved risk-segregation plans. 

The final guideline, published 28 November 2025, allowed overlapping activities but enforced stricter disclosures and monitoring.

A timeline of major reforms:
 

These developments show a clear trend: RBI is tightening control as NBFCs account for a growing share of new credit in India.

What Stakeholders Are Saying About RBI’s Move?

Analysts quoted in Business Today say this is the strongest signal yet that the RBI wants greater transparency across complex financial groups. Industry specialists note that stricter RBI NBFC regulations will force large conglomerates to streamline subsidiaries, reducing cross-entity risks. 

Some NBFC leaders told economic publications that while consolidation may reduce flexibility, it will enhance long-term stability under evolving NBFC group structure norms.

Conclusion

RBI’s latest intervention marks a major step toward cleaning up India’s NBFC landscape. Groups with multiple finance arms must now prepare for consolidation, tighter governance and enhanced supervisory oversight.
 

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