Registration, Exemption & Deregistration Framework under the RBI (NBFC – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026
The Reserve Bank of India, vide its Amendment Directions dated April 29, 2026 (effective July 1, 2026), has introduced a new category of NBFCs called as an ‘Unregistered Type I NBFCs’ which are exempt from registration under Section 45IA of the RBI Act, 1934. The FAQs below are intended to help stakeholders understand the eligibility, process and ongoing obligations under this framework, and are based on the Amendment Directions and RBI’s clarificatory FAQs on the subject.
A. Concept & Applicability
1. What is an ‘Unregistered Type I NBFC’?
Ans: Unregistered Type I NBFCs’ are those ‘NBFCs not availing public funds and not having any customer interface’ which have asset size below Rs.1,000 crore and fulfil the principal business criteria under the RBI Act, 1934, in terms of paragraph 65A of the Directions.
2. Why has RBI introduced this new category?
Ans: The category has been introduced to rationalise the regulatory burden on NBFCs that operate purely on owned funds, without accessing public funds and without any customer interface. Since such entities pose limited systemic or consumer risk, RBI has provided them a structured, principle-based exit from registration, while retaining safeguards against misuse.
3. How is ‘Unregistered Type I NBFC’ different from ‘Type I NBFC’ and ‘Type II NBFC’?
Ans: ‘Type I NBFC’ is an NBFC that meets the ‘no public funds / no customer interface’ criteria and continues to hold a CoR as Type I NBFC. ‘Unregistered Type I NBFC’ is the same category of NBFC, but one that is exempt from registration (i.e., does not hold, or has surrendered, its CoR). ‘Type II NBFC’ is a residual category — any NBFC other than a Type I NBFC, i.e., one that avails public funds and/or has customer interface.
B. Eligibility Conditions for Exemption
4. What are the conditions that must be cumulatively satisfied to qualify as an ‘Unregistered Type I NBFC’?
Ans: As per paragraph 38A read with 65A, an NBFC must:
- operate without public funds;
- having no customer interface as a conscious, long-term business model; and
- have an asset size of less than Rs.1,000 crore as per the latest audited balance sheet.
5. What qualifies as ‘public funds’ for this purpose, and does it cover indirect receipt?
Ans: ‘Public funds’ is inclusive in nature, which includes all funds either raised in the form of a bank loan or other unsecured loan raised from any other entity that falls outside the group (as ICD), whether as a plain vanilla loan or through issuance of debentures or commercial papers. In case funds are raised from group companies, then such funds raised by NBFC shall not be regarded as Public Funds; however, if such group company has access to public funds (such as a bank loan) then such funds raised by NBFC from that group company shall be regarded as public funds. Thus, the determination of having access to public funds is based on the ultimate source of the funds and not merely on the immediate counterparty from whom such funds are received. Whereas, funds received by way of share capital, compulsorily convertible instruments (convertible into equity shares within a period not exceeding five years from the date of issue) are specifically excluded from the ambit of “public funds” under the RBI framework.
6. What is meant by ‘customer interface’, and are there any specific activities barred?
Ans: ‘Customer interface’ has been defined by the RBI in a broad manner which covers interaction between the NBFC and its customers while carrying on its business. Here, the term ‘business’ is not defined under the directions and in general parlance, the word business covers all activities of an NBFC either as main lending activity or any other activity even if it is not related to the main activity. This definition also holds good even if an NBFC does not carry out lending activity, and for such NBFC, even sale of third-party products such as Mutual Funds, Insurance Policies, etc. shall be regarded as ‘customer interface’. This understanding can be further substantiated from the FAQ released by the RBI wherein any interaction undertaken by the NBFC in the course of its business involving lending, providing guarantees, placing inter-corporate deposits, or offering any other financial product or service would constitute a customer interface. Moreover, RBI has also clarified that such activities would amount to a customer interface even when undertaken with group entities, associates, shareholders, or directors.
7. How is the Rs.1,000 crore asset-size threshold to be computed; on a standalone or group basis?
Ans: The threshold is tested on the latest audited balance sheet of the individual NBFC. However, where a Group has multiple ‘Unregistered Type I NBFCs’, the asset sizes of all such entities in the Group must be aggregated for the purpose of monitoring the threshold (see next FAQ).
8. How does an NBFC identify which of its group companies must be included while aggregating asset size for the Rs.1,000 crore threshold?
Ans: This requires first identifying which group companies qualify as NBFCs in the first place — including those that are NBFCs “by deeming fiction” rather than by registration. Paragraphs 37 and 38 of the Directions draw on the Principal Business Criteria (PBC) laid down in RBI’s press release 1998-99/1269 dated April 8, 1999, under which a company is treated as a “Deemed NBFC” if: (i) its financial assets constitute more than 50% of its total assets, and (ii) its income from financial assets constitutes more than 50% of its gross income — both limbs must be satisfied. Every group company should therefore be tested against the PBC. Any group entity that meets this test is a Deemed NBFC and, if it otherwise satisfies the “no public funds / no customer interface” conditions, would itself fall within the “Unregistered Type I NBFC” category. Consequently, while computing the aggregate asset size for the Rs.1,000 crore threshold, the applicant NBFC must add together its own assets and the assets of every such group company classified as an Unregistered Type I NBFC under the PBC test — not merely the assets of entities already holding an NBFC-type name or CoR. The aggregate must remain below Rs.1,000 crore for the group to remain eligible to apply for deregistration.
9. What happens if the aggregate asset size of multiple ‘Unregistered Type I NBFCs’ in a Group cross Rs.1,000 crore?
Ans: If the aggregate asset size of all ‘Unregistered Type I NBFCs’ within a Group is Rs.1,000 crore or more, all such NBFCs in the Group become liable to seek registration as ‘Type I NBFC’ and will be governed by the applicable regulatory instructions issued by RBI. This is a key anti-arbitrage safeguard to prevent groups from splitting a large NBFC business into multiple sub-1,000 crore entities to avoid registration.
C. Deregistration Process
10. Is deregistration mandatory for existing NBFCs that meet the ‘Unregistered Type I NBFC’ criteria?
Ans: No. Filing for deregistration is optional, not mandatory. An NBFC that satisfies the eligibility conditions but chooses to retain its CoR will simply be classified and regulated as a ‘Type I NBFC’, with access to the relaxations available to that category.
11. By when must an existing NBFC apply for deregistration to avail this one-time window?
Ans: Existing eligible NBFCs — including those already holding CoR as ‘Type I NBFC’ — may apply for deregistration within six months of the effective date, i.e., on or before December 31, 2026.
12. What if an NBFC does not currently meet the exemption criteria but expects to meet them in future — can it still apply for deregistration later?
Ans: Yes. The Directions clarify that NBFCs not currently fulfilling the prescribed criteria, but expected to fulfil them at a later date, remain eligible to apply for deregistration at that future point in time. The December 31, 2026, timeline applies to entities already eligible as of the effective date; it is not a bar on later applications once eligibility is met.
13. Through which portal is the application for deregistration to be filed, and in what form?
Ans: The application is to be made through RBI’s PRAVAAH portal, on the company’s letterhead.
14. Does obtaining the status of an Unregistered Type I NBFC amount to surrender of the Certificate of Registration (CoR)?
Ans: No. Obtaining the status of an Unregistered Type I NBFC does not amount to surrender of the Certificate of Registration (CoR). An Unregistered Type I NBFC continues to be an NBFC but is exempt from the requirement of holding a CoR upon satisfying the prescribed eligibility conditions. In contrast, upon surrender and cancellation of the CoR by the RBI, the company ceases to be an NBFC and can no longer carry on the business of a Non-Banking Financial Institution (NBFI). Thus, operating as an Unregistered Type I NBFC and surrender of the CoR are two distinct concepts with different legal consequences.
15. Is the financial position as on March 31, 2026, relevant while assessing eligibility for deregistration?
Ans: No. The position as on March 31, 2026, need not be reckoned for the purpose of the deregistration application. What matters is that the NBFC satisfies the ‘Unregistered Type I NBFC’ conditions as of the date it files its application.
D. Registration Requirement (Reverse Scenario)
16. What if an existing Company, not registered as an NBFC, meets PBC criteria but does not have ‘public funds’ and ‘customer interface’ and asset size is less than Rs. 1000 crores, whether such Company requires registration and then go for De-registration?
Ans: Such Company shall be deemed to be called as ‘Unregistered Type-I NBFC ’, and it is not required to seek registration from RBI.
17. What if an existing unregistered NBFC (not currently having CoR) has an asset size of Rs.1,000 crore or more?
Ans: Such an NBFC — i.e., one that otherwise meets the ‘no public funds / no customer interface’ test but has an asset size of Rs.1,000 crore or more — is required to apply for registration as ‘Type I NBFC’ through PRAVAAH, accompanied by the prescribed documents. CoR will be issued once RBI is satisfied that the registration conditions are met.
E. Ongoing Compliance Obligations
18. What ongoing compliance applies once an entity becomes an ‘Unregistered Type I NBFC’?
Ans: The entity must continue to satisfy the eligibility conditions at all times, pass the prescribed annual Board Resolution at the beginning of the financial year that the company will not avail public funds and will also not have customer interface during the year, and disclose its status as ‘Unregistered Type I NBFC’ — along with the status of public funds and customer interface — in the Notes to Accounts to its financial statements every year.
19. Is there an auditor reporting obligation for ‘Unregistered Type I NBFCs’?
Ans: Yes. The Statutory Auditors of an ‘Unregistered Type I NBFC’ are required to submit an Exception Report to RBI in case of any violation of the conditions relating to public funds, customer interface, or any other condition attached to the exemption.
20. Do ‘Type I NBFCs’ (registered) have a similar disclosure and auditor-reporting requirement?
Ans: Yes. Type I NBFCs must disclose in the Notes to Accounts that the company did not avail public funds and did not have customer interface during the year, and their Statutory Auditors must submit an exception report to RBI’s Department of Supervision in case of any violation of these conditions.
21. If an ‘Unregistered Type I NBFC’ later wishes to avail public funds or have customer interface, what must it do?
Ans: It must invariably seek prior registration with RBI as a ‘Type II NBFC’ before availing public funds and/or having customer interface — it cannot do so while continuing in unregistered/Type I status.
F. Overseas Investment & Other Restrictions
22. Can an ‘Unregistered Type I NBFC’ undertake overseas investment in financial sector?
Ans: If an Unregistered Type I NBFC intends to undertake overseas investment in the financial services sector, it must first get registered with RBI and be regulated as a Type I NBFC and comply with paragraphs 15 to 19 of the RBI (NBFC – Undertaking of Financial Services) Directions, 2025, including obtaining RBI’s prior approval.
23. Can an ‘Unregistered Type I NBFC’ undertake overseas investment in Non-financial sector?
No. In terms of the RBI (Non-Banking Financial Companies – Undertaking of Financial Services) Directions, 2025, an NBFC is not permitted to make overseas investments in the non-financial sector. Accordingly, an entity that has obtained the status of an Unregistered Type I NBFC cannot undertake overseas investment in the non-financial sector.
G. Regulatory Oversight & Consequences of Violation
24. Does an ‘Unregistered Type I NBFC’ fall completely outside RBI’s regulatory purview?
Ans: No. The exemption is limited strictly to sections 45IA and 45IC of the RBI Act, 1934. These entities continue to be subject to the other provisions of Chapter IIIB of the RBI Act, and RBI retains the right to issue specific instructions to them if any risk or concern is observed. General Directions apply to them only if specifically made applicable, but RBI also retains power to take action under Chapter V of the RBI Act.
25. What happens if an ‘Unregistered Type I NBFC’ is found to be availing public funds and/or has customer interface in violation of the exemption conditions?
Ans: This would amount to a violation of the exemption conditions. The entity would be required to seek registration as ‘Type II NBFC’ with RBI prior to availing public funds/customer interface, failing which it would be liable to penal action under the provisions of the RBI Act, 1934. RBI has indicated that such violations will be viewed seriously.
26. Is prior RBI approval needed before an ‘Unregistered Type I NBFC’ or ‘Type I NBFC’ starts availing public funds or customer interface?
Ans: Yes. Prior approval of RBI is required, and public funds/customer interface may be availed only after obtaining the requisite CoR as ‘Type II NBFC’.
H. Consequential Changes to Other NBFC Directions
27. Have other NBFC-related RBI Directions also been amended as a consequence?
Ans: Yes. Consequential changes replacing the phrase ‘NBFC not availing public funds and not having any customer interface’ with ‘NBFC holding Certificate of Registration as Type I NBFC’ have been made in the applicability clauses of extant NBFC Directions.
28. What is the practical effect of this consequential change for compliance teams?
Ans: It means the relaxations under existing Directions, which were earlier available on the basis of an entity simply meeting the ‘no public funds / no customer interface’ test, are now available only to entities that formally hold a CoR as ‘Type I NBFC’. An ‘Unregistered Type I NBFC’ (which by definition does not hold, or has surrendered, its CoR) would need to separately verify applicability of each such Direction to its facts.
Disclaimer: This FAQ is prepared for general informational purposes based on the RBI (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026 dated April 29, 2026, and RBI’s clarificatory FAQs on the subject. It does not constitute legal or professional advice. Entities should assess their specific facts and, where necessary, seek professional guidance before initiating registration/deregistration under this framework.
