In a significant regulatory development aimed at enhancing risk sensitivity and capital efficiency in India’s financial system, the Reserve Bank of India (RBI) has issued the Draft Non-Banking Financial Company – Scale Based Regulation (NBFC-SBR) Amendment Directions, 2025. The proposed amendments focus on refining the risk weight framework for infrastructure exposures of NBFCs, aligning them more closely with the actual risk profile of operational projects.
The draft directions, released on October 24, 2025, are open for public consultation until November 21, 2025. If adopted, the changes will take effect from April 1, 2026, or earlier for NBFCs that choose to implement them ahead of schedule.
Objectives of the Amendment Directions
The RBI’s proposed amendments aim to:
- Introduce a principle-based framework for assigning risk weights to infrastructure exposures
- Promote better risk assessment and capital allocation by NBFCs
- Encourage lending to high-quality operational infrastructure projects
- Ensure regulatory consistency across financial institutions
| Objective | Regulatory Impact |
|---|---|
| Principle-based risk weighting | Enhances transparency and consistency |
| Incentivizing operational projects | Supports infrastructure development |
| Risk-sensitive capital norms | Improves financial system resilience |
| Harmonization with banks | Aligns NBFC norms with broader prudential standards |
These changes are part of RBI’s ongoing efforts to strengthen the scale-based regulatory framework introduced in 2023.
Classification of High-Quality Infrastructure Projects
Under the draft amendments, NBFCs may assign lower risk weights to infrastructure projects that meet specific criteria, thereby recognizing their reduced credit risk.
| Criteria for High-Quality Projects | Description |
|---|---|
| Operational History | At least one year of satisfactory operations post commercial completion |
| Standard Asset Classification | Exposure must be classified as ‘standard’ in the lender’s books |
| Revenue Certainty | Revenue primarily from a single counterparty (e.g., government or PSU) |
| Contractual Safeguards | Provisions such as escrow of cash flows and take-or-pay clauses |
Projects meeting all these conditions will be eligible for reduced risk weights, encouraging NBFCs to finance stable infrastructure assets.
Proposed Risk Weight Structure
The RBI has proposed a tiered risk weight system based on repayment performance and project quality.
| Repayment Status of Obligor | Proposed Risk Weight (%) | Regulatory Rationale |
|---|---|---|
| ≥10% of sanctioned amount repaid | 50 | Indicates strong repayment capacity |
| 5–10% repaid | 75 | Moderate repayment performance |
| <5% or no repayment | 100 or higher | Higher risk, subject to standard classification |
This performance-linked approach incentivizes NBFCs to assess borrower behavior and project viability more rigorously.
Implications for NBFCs
The proposed amendments will have wide-ranging implications for NBFCs engaged in infrastructure lending.
| Impact Area | Expected Outcome |
|---|---|
| Capital Adequacy | More efficient capital usage for low-risk assets |
| Lending Strategy | Shift towards operational and high-quality projects |
| Risk Management | Enhanced credit appraisal and monitoring |
| Regulatory Compliance | Need for updated internal frameworks |
NBFCs will need to recalibrate their risk models and lending portfolios to align with the new norms.
Timeline and Implementation
| Milestone | Date |
|---|---|
| Draft Directions Released | October 24, 2025 |
| Public Feedback Deadline | November 21, 2025 |
| Final Guidelines Expected | Q1 2026 |
| Effective Date | April 1, 2026 (or earlier if voluntarily adopted) |
The RBI has invited stakeholders to submit comments and suggestions to ensure broad-based consensus and practical implementation.
Industry Response and Expert Commentary
Initial reactions from industry experts and NBFCs have been largely positive, with many welcoming the move as a step toward more risk-sensitive regulation.
- Rajiv Sabharwal, CEO, Tata Capital: “The RBI’s proposal recognizes the maturity of operational infrastructure projects and aligns capital norms with actual risk.”
- Renu Karnad, MD, HDFC Ltd: “This will encourage NBFCs to support India’s infrastructure growth while maintaining financial discipline.”
- Sandeep Batra, CFO, ICICI Bank: “A principle-based framework is essential for long-term stability and investor confidence.”
| Stakeholder Group | Reaction Summary |
|---|---|
| NBFCs | Supportive of reduced risk weights |
| Infrastructure Developers | Expect easier access to financing |
| Credit Rating Agencies | Anticipate better risk differentiation |
| Investors | View as positive for NBFC balance sheets |
The draft directions are expected to stimulate dialogue across the financial ecosystem.
Alignment with RBI’s Broader Regulatory Agenda
The amendments are part of RBI’s larger strategy to modernize financial regulation and promote responsible credit growth.
| RBI Regulatory Theme | Connection to NBFC-SBR Amendments |
|---|---|
| Scale-Based Regulation | Tailored norms based on NBFC size and activity |
| Risk-Based Supervision | Focus on risk-sensitive capital allocation |
| Infrastructure Financing | Support for national development priorities |
| Financial Stability | Strengthening NBFC resilience and governance |
These directions complement other recent initiatives, including internal ombudsman reforms and capital market exposure guidelines.
Challenges and Considerations
While the amendments offer clear benefits, NBFCs may face operational and compliance challenges during implementation.
| Challenge | Mitigation Strategy |
|---|---|
| Data Collection for Risk Assessment | Enhanced borrower reporting and analytics |
| System Upgrades | Investment in risk management software |
| Staff Training | Regulatory workshops and certification |
| Transition Planning | Phased adoption and pilot testing |
The RBI may issue further clarifications to support smooth rollout.
Conclusion
The Draft NBFC Scale Based Regulation Amendment Directions, 2025 mark a pivotal shift in how infrastructure lending is regulated in India’s non-banking financial sector. By introducing a nuanced, performance-linked risk weight framework, the RBI aims to balance financial stability with developmental goals. As stakeholders prepare for implementation, the amendments promise to reshape credit flows, enhance risk management, and strengthen the role of NBFCs in India’s infrastructure journey.
Disclaimer: This article is based on publicly available regulatory documents and expert commentary. It does not constitute financial or legal advice. All views expressed are for informational purposes only.
