The Reserve Bank of India on Wednesday allowed non-banking financial companies to open branches without prior approval in most cases, while laying down specific conditions for deposit-taking entities based on net owned funds and credit rating.
The central bank said the changes were aimed at giving NBFCs greater operational flexibility for branch expansion while ensuring regulatory compliance.
New framework for branch expansion
The RBI has issued the Reserve Bank of India (Non-Banking Financial Companies Branch Authorisation) Amendment Directions, 2026. Under the revised framework, an NBFC will generally be permitted to open branches without obtaining prior approval from the central bank unless it is specifically restricted.
The RBI said the objective of the amended directions was to facilitate ease of doing business by providing operational flexibility to NBFCs in expanding their branch network. The move marks a shift from the earlier approach under which certain categories required regulatory approval or prior intimation.
Conditions for deposit-taking NBFCs
The central bank has retained a differentiated approach for deposit-taking NBFCs based on their financial strength and credit profile. According to the directions, a deposit-taking NBFC with net owned funds of up to Rs 50 crore or a credit rating below AA may open a branch or appoint agents only within the state where its registered office is located.
If such an NBFC has net owned funds of more than Rs 50 crore and a credit rating of AA or above, it may open a branch or appoint agents anywhere in India. The screenshots also indicate that NBFCs with net owned funds exceeding Rs 50 crore but with a rating below AA will remain restricted to opening branches within their home state.
Immediate effect and changes for CICs
The RBI said the revised norms will come into force with immediate effect. Alongside the branch authorisation changes, the central bank also modified provisions relating to core investment companies.
Earlier, the RBI could advise a core investment company to wind up its overseas representative office in case of non-compliance. The revised directions replace that provision with a mechanism to review or recall approvals granted for such offices, indicating a change in the regulatory approach within the existing framework.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
