The Reserve Bank of India has proposed a draft amendment to restrict revolving credit products provided by non-banking financial companies, except for authorized credit card issuers. This move aims to enhance regulatory oversight.
RBI Introduces Draft NBFC Credit Facility Amendment
The Reserve Bank of India has issued a draft amendment concerning credit facilities provided by non-banking financial companies (NBFCs), proposing to restrict revolving credit products to only authorized credit card issuers. This move is aimed at enhancing regulatory oversight within the financial sector.
The RBI's initiative stems from concerns over potential misuse and over-leveraging associated with revolving credit products, which have gained widespread popularity among consumers. The need for greater regulation has been underscored by increasing instances of consumer debt related to these products.
Under the proposed amendments, NBFCs would be obliged to limit their engagement in offering credit on a revolving basis unless they meet specific criteria set forth by the RBI, thereby assuring consumer protection and financial stability.
This draft amendment highlights the central bank's commitment to curbing reckless lending practices and ensuring responsible financing. Legal practitioners operating in the financial sector should keep abreast of the developments surrounding this amendment, particularly when advising clients on compliance and lending policies.
Citations
- Reserve Bank of India Draft Circular No. 2026/Draft-12