The October 2026 edition of NBFC FinSight, presented by DSB Law Group, brings together important regulatory developments, financial trends and emerging compliance requirements shaping India’s Non-Banking Financial Company (NBFC) sector. This edition explores developments in monetary policy, improvements to the Account Aggregator framework, GST treatment of co-lending services, cancellation of NBFC registrations, credit growth expectations, revolving credit restrictions and revised advertising and marketing requirements.
As NBFCs continue expanding their role in India’s financial system, maintaining a balance between business growth, financial stability and regulatory compliance has become increasingly important. This article examines the seven developments in detail, explains their potential implications and highlights practical considerations for NBFCs, industry professionals and financial institutions.
1. Financial Access and Customer Convenience: Changes to the Account Aggregator Framework
India’s financial services sector is increasingly moving towards digital, consent-based information sharing. The Account Aggregator (AA) framework has emerged as an important part of this transformation by allowing customers to securely share financial information with regulated financial institutions.
In October 2026, the Reserve Bank of India (RBI) announced measures to strengthen interoperability among NBFC-Account Aggregators and improve access to consolidated financial information. These measures are expected to make financial information easier to access and share, benefiting both customers and institutions that rely on verified financial data.
Understanding the Account Aggregator framework
An Account Aggregator is an RBI-regulated entity that facilitates the transfer of financial information between institutions with the customer’s explicit consent.
The framework broadly involves three participants:
- Financial Information Provider (FIP): An institution, such as a bank or NBFC, that holds the customer’s financial information.
- Financial Information User (FIU): A regulated institution that requests and uses financial information for an authorised purpose.
- Account Aggregator (AA): An intermediary that facilitates secure information sharing based on the customer’s consent.
For example, when a customer applies for a loan, the lender may require bank statements or other financial information to assess repayment capacity. Through the AA framework, the customer can authorise the transfer of eligible financial information electronically instead of collecting and submitting each document separately. This can improve efficiency while allowing customers greater control over how their information is shared.
What changes have been announced?
| Development | What it means | Expected benefit |
| Account Aggregator interoperability | Customers can share financial information across participating Financial Information Providers through an Account Aggregator of their choice. | Greater flexibility and convenience |
| Bank deposit information in CAS | SEBI-regulated depositories will be facilitated in including bank deposit information in Consolidated Account Statements through the AA framework. | A more comprehensive financial overview |
| Wider access to financial information | Customers, including those without demat accounts, can continue accessing consolidated financial information through AAs. | Greater accessibility |
| Expected implementation | The announced target is 31 December 2026. | Time for operational and technology readiness |
Why interoperability matters
Interoperability allows different participants in the AA ecosystem to work together more efficiently. Without sufficient interoperability, a Financial Information User may need separate technical arrangements to access information through different aggregators. Standardised connectivity can reduce this complexity.
For customers, it means greater flexibility in selecting an Account Aggregator rather than being restricted by the technical arrangements of individual institutions. For NBFCs, the improvements may offer practical benefits in credit assessment, customer onboarding and financial-data verification.
Potential impact on NBFC lending
- Faster credit assessment: Consent-based access to financial information may reduce the time required to collect and verify supporting documents.
- Improved borrower evaluation: Eligible financial information can help lenders better understand cash flows, financial commitments and repayment behaviour.
- Better customer experience: Borrowers may face fewer repetitive documentation requirements, especially when applying for financial products through digital channels.
- Greater opportunities for MSME lending: Smaller businesses often face difficulties maintaining or submitting extensive financial documentation. Easier access to verified financial information can support more informed lending decisions.
However, faster access to information does not remove the need for adequate underwriting and customer verification.
What should NBFCs consider?
Institutions participating in the framework should evaluate their technology infrastructure, consent-management procedures, information-security arrangements and internal processes for handling customer data. They should also monitor the implementation requirements and interoperability specifications applicable to their roles as Financial Information Providers or Financial Information Users.
Greater access to financial information can improve lending efficiency, but customer consent, data protection and responsible use of information must remain central to the process.
Key takeaway: A more interoperable AA ecosystem can strengthen financial inclusion, simplify documentation and support faster lending decisions while preserving customer control over financial information.
2. Monetary Policy and NBFC Financial Stability: What the Numbers Indicate
Monetary policy decisions influence borrowing costs, availability of credit and financial conditions throughout the economy. For NBFCs, these decisions are particularly important because many institutions depend on borrowings from banks, debt markets and other financial institutions to fund their lending operations.
In its October 2026 monetary policy announcement, the RBI increased the policy repo rate by 25 basis points to 5.50%, with the policy stance shifting to calibrated tightening. The development comes at a time when NBFCs continue to demonstrate relatively strong financial fundamentals, although an evolving interest-rate environment creates new considerations for funding and profitability.
Key monetary policy rates
| Policy rate | October 2026 |
|---|---|
| Policy repo rate | 5.50% |
| Standing Deposit Facility (SDF) rate | 5.25% |
| Marginal Standing Facility (MSF) rate | 5.75% |
| Bank rate | 5.75% |
The repo rate is an important monetary policy benchmark. Changes in this rate can influence broader market interest rates and the borrowing costs faced by financial institutions. However, the impact on individual NBFCs depends on their funding mix, contractual borrowing rates, debt maturities and the speed at which market-rate changes are transmitted.
How is the NBFC sector performing?
Despite the changing interest-rate environment, reported financial indicators suggest that the NBFC sector has maintained substantial capital buffers and experienced improvements in asset quality and profitability.
| Financial indicator | June 2025 | June 2026 |
|---|---|---|
| Capital to Risk-Weighted Assets Ratio (CRAR) | — | 25.50% |
| Gross Non-Performing Assets (GNPA) | 3.09% | 2.50% |
| Net Non-Performing Assets (NNPA) | 1.00% | 0.84% |
| Return on Assets (RoA) | 3.01% | 3.37% |
| Net Interest Margin (NIM) | 4.99% | 5.39% |
The June 2025 CRAR comparison was not available in the newsletter.
What do these indicators tell us?
Capital adequacy: A CRAR of 25.50% indicates substantial sector-level capital coverage relative to risk-weighted assets. Capital adequacy helps institutions absorb unexpected losses and maintain financial stability.
Asset quality: The decline in gross and net NPA ratios indicates an improvement in the reported proportion of stressed assets. This may reflect better collections, stronger underwriting and the resolution of certain stressed exposures.
Profitability: Improvement in RoA and NIM suggests that profitability strengthened during the period reviewed.
Nevertheless, these are sector-level indicators. Individual NBFC performance may differ substantially depending on loan categories, borrower profiles and funding structures.
How do higher interest rates affect NBFCs?
An increase in policy rates can influence NBFC operations through several channels.
1. Higher cost of borrowing: NBFCs that obtain funds through floating-rate loans or short-term borrowing arrangements may face higher financing costs as interest rates rise.
2. Pressure on lending margins: Institutions may be unable to immediately increase lending rates on existing loans, particularly where the loans carry fixed interest rates. As a result, borrowing costs can rise faster than interest income, creating pressure on profitability.
3. Changes in borrower demand: Higher lending rates can affect borrowing decisions, particularly among price-sensitive customers and businesses. Borrowers may postpone major purchases, reduce financing requirements or seek alternatives where borrowing becomes more expensive.
4. Greater importance of liquidity management: NBFCs must ensure that adequate resources remain available to meet repayment obligations, disbursement commitments and unexpected funding requirements.
What should NBFC management prioritise?
A prudent response to changing interest rates should include a review of funding sources, loan-pricing policies, liquidity coverage and asset-liability mismatches. Institutions should also assess how their profitability would be affected under different interest-rate scenarios.
Strong capital adequacy and improving asset quality provide a foundation for growth, but sustainable profitability requires disciplined funding and risk management.
Key takeaway: The NBFC sector has shown financial resilience, but higher policy rates may affect funding costs, lending margins and borrower demand. Institutions must adapt their financial strategies accordingly.
3. Proposed 18% GST on NBFC Co-Lending Services: Understanding the Difference Between Interest and Service Income
Co-lending has become an important model for expanding credit access, especially to borrowers and market segments where conventional banking channels may have limited reach. Under a co-lending arrangement, banks and NBFCs jointly participate in lending, generally in an agreed proportion. The model combines the funding resources of banks with the distribution capabilities and local market experience of NBFCs.
What changed in October 2026?
On 8 October 2026, the GST Council’s fitment committee recommendation concerning the taxability of services provided by NBFCs to banks under co-lending arrangements was reported. Subsequently, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 266/12/2026-GST dated 28 October 2026, clarifying that lending services supplied by an NBFC to a bank under a co-lending arrangement are taxable under GST.
The clarification identifies the value of these services as the value specified in the contractual agreement between the NBFC and the bank. The reported GST rate for the relevant taxable services is 18%, subject to the applicable rate classification.
Understanding the distinction
| Component | GST treatment | Explanation |
|---|---|---|
| Interest on the underlying loan | Exempt, subject to applicable provisions | Interest earned from the lending transaction retains its relevant exemption. |
| Services provided by an NBFC to a bank | Taxable | Separately identifiable lending services provided under the co-lending arrangement attract the applicable GST. |
| Value of taxable services | Contractual value | The applicable CBIC clarification refers to the value specified in the agreement between the NBFC and the bank. |
| Documentation | Important for determining treatment | Agreements, invoices and transaction records should clearly establish the nature and value of services. |
What services are covered?
- Customer sourcing and onboarding activities.
- Know Your Customer (KYC) procedures.
- Credit appraisal and underwriting.
- Loan servicing and monitoring.
- Collection of repayments and recovery-related activities.
These activities may form part of the commercial responsibilities assumed by an NBFC under its co-lending agreement.
Why does this clarification matter?
The distinction between interest income and consideration for services is significant because the applicable GST treatment may differ. Consider a co-lending arrangement where an NBFC contributes its share of loan funding and also undertakes customer acquisition, underwriting and servicing responsibilities for the banking partner.
The NBFC may receive interest attributable to its lending participation and separate consideration for providing services to the bank. While eligible interest income may be exempt, the consideration attributable to taxable services must be evaluated separately under the GST framework. This makes contractual clarity particularly important.
Practical implications for NBFCs
- Review existing agreements: Contracts should clearly identify the services being provided, the responsibilities of each institution and the method used to determine service consideration.
- Examine revenue classifications: Finance teams should distinguish interest income from taxable service consideration based on the actual nature of the transaction.
- Review invoicing arrangements: NBFCs should assess whether their invoicing and accounting systems appropriately recognise taxable services and applicable GST.
- Evaluate commercial impact: Tax treatment may influence the pricing and profitability of co-lending arrangements, depending on contractual terms and the availability of eligible input tax credit.
- Coordinate with banking partners: Banks and NBFCs should maintain consistent documentation concerning service responsibilities, consideration and taxation.
Illustration
Suppose an NBFC charges a bank ₹10 lakh as consideration for taxable lending services under a co-lending arrangement. At an applicable GST rate of 18%, the GST amount would be ₹1.80 lakh. This is an illustrative calculation only. Actual classification, valuation and tax treatment depend on the applicable law and the contractual arrangement.
Clear contractual separation between lending income and service consideration can reduce uncertainty and support more consistent GST compliance.
Key takeaway: The October 2026 CBIC clarification brings greater clarity to the tax treatment of services supplied by NBFCs to banks under co-lending arrangements. NBFCs should review their agreements, accounting practices and invoicing procedures accordingly.
4. Cancellation of 13 NBFC Registrations: Why Regulatory Compliance Matters
Obtaining an RBI Certificate of Registration (CoR) is an essential step for entities seeking to carry on regulated NBFC business. However, registration is not a one-time regulatory requirement. An NBFC must continue satisfying the relevant conditions, maintaining regulatory records and complying with applicable directions throughout its operations.
On 9 October 2026, the RBI announced the cancellation of the Certificates of Registration of 13 NBFCs under Section 45-IA(6) of the Reserve Bank of India Act, 1934.
A snapshot of the cancellation
| Particulars | Number |
|---|---|
| Total Certificates of Registration cancelled | 13 |
| NBFCs registered in West Bengal | 11 |
| NBFCs registered in Tamil Nadu | 2 |
As a consequence of cancellation, the affected companies are no longer permitted to transact the business of a Non-Banking Financial Institution as defined under the relevant provisions of the RBI Act.
What does cancellation of registration mean?
An NBFC Certificate of Registration provides regulatory authorisation to undertake the relevant non-banking financial business. When the RBI cancels a registration, the entity loses the authorisation associated with that certificate.
It is important to distinguish cancellation of NBFC registration from incorporation under the Companies Act. Cancellation of a CoR does not, by itself, mean that the company has ceased to exist as a legal entity. The company must assess the legal and regulatory implications of cancellation, including the restrictions on continuing regulated financial activities.
Under what circumstances can registration be cancelled?
Section 45-IA(6) of the RBI Act empowers the RBI to cancel registration on specified statutory grounds. Depending on the circumstances, these can involve:
- Failure to continue the relevant business: Circumstances involving an entity that ceases to carry on the regulated business for which registration was granted.
- Failure to satisfy registration conditions: A company may fail to meet conditions relevant to maintaining its regulatory authorisation.
- Non-compliance with applicable regulatory requirements: Failure to comply with prescribed directions or requirements can lead to regulatory consequences.
- Other grounds specified under the Act: The statutory provision sets out additional circumstances and procedures relating to cancellation.
The RBI’s October 9 announcement identifies the affected entities and cancellation orders. It does not establish that all 13 entities were cancelled for the same reason.
Lessons for existing NBFCs
- Registration must be supported by continuing compliance. Maintaining a CoR requires regular attention to applicable regulatory obligations, rather than relying solely on the approval originally granted.
- Business activities should remain aligned with regulatory permissions. Material changes in operations, ownership or the business model may require regulatory assessment or approval.
- Financial and statutory records must remain current. NBFCs should maintain reliable financial statements, corporate records and evidence of compliance with applicable directions.
- Board oversight is important. Directors and senior management should receive appropriate information about regulatory obligations, compliance observations and material risks.
- Regulatory concerns should be addressed promptly. Where deficiencies or supervisory observations arise, institutions should establish corrective measures and monitor their implementation.
Why does this matter for the wider sector?
Regulatory authorisation supports trust in India’s financial system. Cancellation announcements remind institutions and other stakeholders that NBFC registration is subject to continuing statutory conditions. For customers, investors and business partners, an entity’s current regulatory status is an important consideration. For existing NBFCs, periodic reviews of regulatory eligibility can help identify issues before they develop into serious compliance problems.
Regulatory registration grants the authority to conduct financial business, while ongoing compliance enables the retention of that authority.
Key takeaway: The cancellation of 13 NBFC registrations reinforces the importance of continuing regulatory eligibility, accurate records, appropriate governance and timely corrective action.
5. NBFC Sector Growth: Why Strong Credit Demand May Not Guarantee Higher Margins
India’s NBFC sector continues to benefit from demand for retail loans, MSME financing, housing finance, vehicle loans and other specialised financial products. Industry analysts expect credit growth and earnings momentum to remain relatively resilient during the second half of FY2026-27 (H2FY27).
However, higher borrowing costs, uneven demand and potential asset-quality pressures create challenges for profitability. This produces an important distinction: an NBFC can experience strong loan growth without achieving a corresponding improvement in lending margins.
Where is growth expected?
| Lending segment | Analyst outlook |
|---|---|
| Gold lending, including non-gold products | Approximately 35–40% growth in the period assessed |
| Diversified NBFC lending | Mid-20% growth in assets under management |
| Vehicle financing | High-teens growth expectations |
| Housing finance | Low-double-digit AUM growth |
| Microfinance | Late-teens AUM growth expectations |
These are market expectations based on analyst assessments and should not be interpreted as guaranteed sector outcomes.
Why is credit demand expected to remain resilient?
- Retail consumption: Continued household spending can support demand for personal, vehicle and consumer-related financing.
- MSME financing: Small and medium-sized businesses require funding for working capital, equipment, operations and expansion.
- Housing finance: Demand for residential property and associated financing may provide continued lending opportunities.
- Vehicle financing: Financing requirements for passenger and commercial vehicles can support credit growth, although demand may differ across customer categories and regions.
- Specialised financing: Gold-backed loans and other specialised credit products may continue attracting borrowers seeking accessible financing options.
Why might lending margins come under pressure?
An NBFC generally earns income by lending funds at a rate higher than its cost of obtaining those funds. The difference between lending yields and funding costs is an important contributor to profitability. When funding costs rise more quickly than the income generated from loans, lending spreads can narrow.
An illustrative example
Assume an NBFC initially has:
| Particulars | Initial position | After funding-cost increase |
|---|---|---|
| Average lending yield | 15.00% | 15.00% |
| Average funding cost | 9.00% | 9.75% |
| Simple interest-rate spread | 6.00% | 5.25% |
This illustration shows a 75-basis-point reduction in the simple lending spread, even though the lending yield remains unchanged.
Actual Net Interest Margin is calculated differently and depends on interest-earning assets and other financial factors. Nevertheless, the example demonstrates why rising funding costs can affect profitability.
Asset quality remains a major consideration
Strong loan demand does not automatically translate into lower credit risk. NBFCs must continue assessing borrowers’ repayment capacity, especially in segments where incomes can be affected by economic conditions.
Important risk factors include:
- Rural income fluctuations: Irregular monsoons or agricultural conditions can affect repayment capacity in rural lending portfolios.
- Inflation: Higher household and business expenses may reduce borrowers’ available cash flows.
- Geopolitical developments: Global disruptions can affect commodity prices, business operations and economic confidence.
- Sector concentration: Excessive exposure to a particular borrower segment or economic activity can increase vulnerability during downturns.
How can NBFCs manage the situation?
A balanced approach should include stronger loan underwriting, improved collections, effective liquidity planning and regular monitoring of portfolio performance. Institutions should also evaluate the profitability of individual lending products instead of relying exclusively on overall credit growth. Diversifying funding sources and maintaining suitable asset-liability structures can help reduce vulnerability to interest-rate fluctuations.
The outlook for H2FY27
The sector’s outlook remains supported by credit demand, financial inclusion and continued participation in specialised lending markets. At the same time, the ability to translate this demand into sustainable earnings will depend on borrowing costs, collection performance and credit quality.
Growth in the loan portfolio is an indicator of business expansion, but sustainable earnings require sound margins, controlled credit costs and strong asset quality.
Key takeaway: NBFCs may continue experiencing healthy credit growth in H2FY27, but funding costs and asset-quality trends will remain important determinants of profitability.
6. Revolving Credit Facilities: Clarification of Existing NBFC Restrictions
Revolving credit facilities provide borrowers with flexibility to access funds repeatedly within a sanctioned credit limit. Unlike a conventional term loan, where the principal is disbursed and repaid according to an agreed schedule, a revolving facility may allow borrowers to repay and draw funds again, subject to the terms of the arrangement.
Such products can be relevant for businesses requiring recurring working capital or flexible short-term financing. In August 2026, the RBI issued draft amendments concerning credit facilities offered by NBFCs, including proposed restrictions on revolving credit products. The proposal generated discussion among industry participants because of its potential implications for existing lending arrangements.
What is the difference between term loans and revolving credit?
| Feature | Term loan | Revolving credit facility |
|---|---|---|
| Principal amount | Fixed sanctioned principal | Credit available within an approved limit |
| Disbursement | One or more instalments | Repeated drawdowns may be permitted |
| Repayment | Predetermined repayment schedule or specified maturity | Repayment and fresh utilisation depend on facility terms |
| Replenishment | Repayment does not restore the original sanctioned principal under the draft definition | Repaid amounts may become available for borrowing again |
| Typical purpose | Financing a defined borrowing requirement | Meeting recurring or flexible funding needs |
What did RBI propose?
The August 2026 draft directions proposed that NBFCs should offer credit products in the nature of term loans and should not offer revolving credit products. The draft also provided an exception for NBFCs specifically authorised by the RBI to issue credit cards.
The proposed definition of a term loan included a fixed principal amount, a predetermined repayment arrangement and the condition that the sanctioned limit should not be replenished merely because principal has been repaid.
What was clarified in October 2026?
During the post-monetary policy press conference on 7 October 2026, RBI Governor Sanjay Malhotra explained that the regulator regarded the proposed restriction as a clarification of its existing regulatory position rather than an entirely new rule.
The RBI also indicated that it was evaluating feedback and considering the implications of different revolving-credit arrangements before reaching a final decision. The distinction between a draft regulatory proposal, the regulator’s supervisory interpretation and a final notified direction is important. As of the developments covered in this edition, institutions should not assume that the draft amendments had already been issued in final form.
Why is the RBI concerned about revolving credit?
Revolving credit products may create different risks compared with traditional term loans. For instance, repeated access to a credit limit can make it more difficult to assess the borrower’s actual borrowing pattern or financial stress if monitoring systems are inadequate.
Additional concerns can arise where:
- Loan balances are repeatedly renewed without sufficient reassessment of repayment capacity.
- Customers depend on fresh borrowing to repay existing obligations.
- Credit facilities are structured in a manner that creates regulatory uncertainty.
- Liquidity requirements change because borrowers can repeatedly access available credit.
These are among the factors that can justify greater attention to product design and risk controls.
What should NBFCs review?
- Product structure: Examine whether existing lending products function as genuine term loans or contain revolving features.
- Sanction conditions: Review whether repayments replenish previously sanctioned borrowing limits.
- Documentation: Ensure agreements clearly explain disbursement, repayment, redrawal and renewal terms.
- Credit assessment: Evaluate how the institution assesses repayment capacity for facilities allowing repeated utilisation.
- Internal controls: Strengthen monitoring of drawdowns, outstanding balances, utilisation patterns and possible borrower stress.
- Regulatory developments: Track final directions and further RBI communications before making conclusions about the ultimate regulatory requirements.
Why does the clarification matter?
NBFCs must carefully examine whether their product structures are consistent with applicable regulatory expectations. A facility described commercially as a flexi-loan or credit line may require closer examination of its actual operation.
The regulatory treatment should follow the substance of the arrangement and the applicable RBI framework, rather than merely the product’s marketing name.
Responsible product structuring requires a clear understanding of the facility’s operation, repayment arrangements and regulatory treatment.
Key takeaway: RBI’s October clarification reinforced its existing supervisory position while the proposed amendments remained under review. NBFCs should assess their credit products carefully and monitor the final regulatory outcome.
7. Advertising and Marketing Compliance: New Responsibilities for NBFCs
Advertising, marketing and customer acquisition are essential activities for financial institutions. However, the sale of financial products also creates responsibilities concerning transparency, customer suitability, consent and fair treatment. Misleading product information, inappropriate sales practices or inadequate supervision of distribution partners can expose customers to financial harm and create significant regulatory risk for NBFCs.
To strengthen customer protection, the RBI issued the Non-Banking Financial Companies – Responsible Business Conduct (Second Amendment) Directions, 2026, introducing comprehensive requirements relating to advertising, marketing and the sale of financial products and services. The amendment was issued on 15 June 2026 and is scheduled to take effect from 1 January 2027.
Why has the framework been strengthened?
Financial products are increasingly distributed through websites, mobile applications, digital platforms and third-party agents. While these channels improve customer reach, they may also increase the risk of incomplete disclosures, misleading promotions, unsuitable products or unauthorised customer contact.
The revised framework seeks to establish clearer expectations for institutions and their marketing partners.
Major regulatory requirements
| Area | Key requirement | What NBFCs should consider |
|---|---|---|
| Marketing policy | A comprehensive policy covering own and third-party financial products and services | Review policy coverage, approval and implementation |
| Customer suitability | Products should be assessed for appropriateness and suitability | Strengthen customer assessment and sales controls |
| DSA/DMA oversight | Due diligence, training, supervision and monitoring | Review agent onboarding and performance arrangements |
| Agent disclosure | Maintain and display prescribed information concerning engaged DSAs/DMAs | Ensure accurate and updated website disclosures |
| Advertising | Promotional communications must be clear and factual | Review interest-rate, fee and product-condition disclosures |
| Customer consent | Explicit consent is required for specified promotional communications | Review consent collection and recordkeeping |
| Mis-selling prevention | Strengthened restrictions on unfair sales practices | Establish controls, grievance procedures and corrective measures |
1. Board-approved marketing policies
Covered NBFCs must maintain a comprehensive policy governing the advertising, marketing and sale of their own and third-party financial products. The policy should address product suitability, customer feedback, compensation in cases of mis-selling and other relevant controls. Institutions engaging DSAs or DMAs must also address their eligibility, due diligence, training, monitoring, audits and procedures for handling non-compliance.
2. Greater responsibility for selling and marketing agents
The revised framework expands the definition of Direct Selling Agents and Direct Marketing Agents to include relevant service arrangements, irrespective of the contractual name used. This is significant for NBFCs working with digital distribution partners or Lending Service Providers involved in customer acquisition and marketing. The use of third-party service providers does not eliminate the institution’s responsibility for ensuring appropriate conduct.
3. Website disclosures concerning agents
NBFCs availing the services of DSAs and DMAs are required to maintain and display prescribed details of their empanelled agents. These details include information such as agent identity, type, address, engagement period and products or services handled. The amendment specifies that modifications to the list should be reflected within seven calendar days. This requirement is intended to improve transparency and allow customers to identify authorised representatives.
4. Responsible promotional communication
Advertising and promotional material should be factual and should disclose relevant product information, including applicable interest rates, fees and charges. NBFCs should also clarify their role when distributing third-party financial products rather than presenting such products as their own. The revised framework places emphasis on explicit customer consent for promotional communications and straightforward arrangements for opting out. These requirements make it important for NBFCs to examine digital advertisements, marketing messages, product brochures, websites and mobile application interfaces.
5. Customer-contact practices
The Directions prescribe conduct standards for employees, agents and other covered representatives involved in sales and marketing. Customer calls and visits should normally take place between 9:00 AM and 7:00 PM, unless the customer has expressly requested or authorised contact outside those hours. The framework also requires respect for customer privacy, appropriate identification and the customer’s communication preferences. These provisions reinforce the importance of professional and responsible customer engagement.
6. Measures against mis-selling
The revised framework addresses several practices that may amount to mis-selling.
These include:
- Selling products that are unsuitable or inappropriate for the customer’s assessed profile.
- Providing misleading or incomplete product information.
- Selling products without the customer’s explicit consent.
- Compulsorily bundling another product with the requested financial product, except as permitted under the framework.
- Using deceptive digital interface practices, commonly referred to as dark patterns.
NBFCs should also examine incentive structures to ensure that employees or distribution partners are not encouraged to promote unsuitable products merely to increase sales.
Applicability
The revised advertising and marketing provisions apply to covered NBFCs with customer interfaces, including HFCs, as relevant under the directions. Certain additional regulated entities, including NBFC-P2P entities, Mortgage Guarantee Companies and Standalone Primary Dealers, are specifically addressed in the applicability framework.
The Directions exclude categories such as Core Investment Companies, NBFC-Account Aggregators, Non-Operative Financial Holding Companies and NBFCs without a customer interface, subject to the exact regulatory provisions.
What should NBFCs do before 1 January 2027?
Preparation should focus on reviewing existing marketing practices and identifying areas requiring changes.
A practical implementation exercise may include:
- Reviewing the institution’s marketing and sales policies.
- Examining existing DSA, DMA and service-provider agreements.
- Assessing customer consent and opt-out procedures.
- Reviewing advertising and product-disclosure formats.
- Updating applicable agent information displayed on the website.
- Evaluating complaints, compensation procedures and mis-selling controls.
- Training employees and relevant marketing partners.
Why does this development matter?
The revised framework changes how NBFCs should approach product distribution and customer engagement. Compliance is not limited to preparing a policy document. Institutions must also ensure that the policy is reflected in day-to-day marketing, sales practices, digital systems and relationships with distribution partners.
Responsible marketing begins with transparent information and informed customer choice. Strong oversight ensures that these principles are maintained throughout the sales process.
Key takeaway: The new requirements reinforce transparent advertising, appropriate product selling, customer consent and accountability across distribution channels. Covered NBFCs should review their practices before the January 2027 effective date.
Building a More Resilient and Responsible NBFC Sector
The developments discussed in the October 2026 edition of NBFC FinSight reflect the changing priorities of India’s financial regulatory environment. On one hand, measures to improve financial-data accessibility and continued demand for credit create opportunities for NBFCs to expand their services and support financial inclusion.
On the other hand, changes in interest rates, rising funding costs, tax treatment and stronger customer-protection requirements make regulatory awareness and risk management increasingly important. The cancellation of NBFC registrations highlights the need to maintain continuing regulatory eligibility. The clarification surrounding revolving credit reinforces the importance of responsible product design. Meanwhile, revised advertising and marketing requirements place greater responsibility on institutions to ensure fair and transparent customer interactions.
For NBFCs, sustainable growth will depend on the ability to combine business expansion with sound governance, strong financial management and consistent regulatory compliance. The institutions best positioned for long-term growth will be those that respond proactively to regulatory developments while maintaining the trust of borrowers, investors and other stakeholders.
How DSB Law Group Can Assist
DSB Law Group provides professional support in NBFC regulatory advisory, corporate compliance, governance, restructuring, legal documentation, taxation and business advisory. Our team assists financial institutions in understanding regulatory developments, assessing compliance obligations and strengthening their operational frameworks.
For professional assistance or to learn more about our NBFC advisory services, connect with DSB Law Group.
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Disclaimer
This article is intended solely for general information and educational purposes. It does not constitute legal, regulatory, taxation, financial or professional advice. Regulatory requirements, interpretations and deadlines may change, and their applicability depends on the facts and circumstances of each institution. Readers should consult the relevant official notifications and obtain appropriate professional advice before taking any action. DSB Law Group shall not be responsible for decisions made solely on the basis of this article.
