RBI to Tighten Oversight of NBFCs in FY26: What You Need to Know
The Reserve Bank of India (RBI) is set to enhance regulatory scrutiny over Non-Banking Financial Companies (NBFCs) in the upcoming financial year, FY26. The focus will primarily be on base layer NBFCs, which form the largest segment of the sector. This move is part of the RBI’s broader initiative to strengthen governance, ensure customer protection, and minimize systemic risks in the financial ecosystem.
Base Layer NBFCs Under the Regulatory Spotlight
Out of 9,291 NBFCs currently operating in India, over 8,700 belong to the base layer—typically smaller institutions with lower risk profiles but wide market reach. These NBFCs are now expected to operate under tighter supervisory protocols.
Key measures likely to be introduced include:
- Increased frequency of regulatory reporting, moving beyond the current annual or biannual submissions.
- Stricter underwriting practices and enhanced standards for loan disbursement.
- Mandatory appointment of qualified Chief Risk Officers (CROs) to oversee internal risk frameworks.
- Higher compliance standards in customer service, governance, and internal controls.
A Shift to Risk-Based Supervision (RBS)
The RBI’s transition to risk-based supervision aims to tailor regulatory oversight according to the risk profile of each NBFC. Companies identified as higher-risk will be required to engage more closely with the regulator, including more frequent data submissions and discussions around credit practices, financial health, and governance.
This proactive model is designed to detect and mitigate risks early, improving overall sector resilience.
