Meet on NBFC reform index today; sector stability in focus
February 25, 2026
The Department of Financial Services (DFS) met on February 25, 2026, to finalize a comprehensive reform agenda for the NBFC sector based on RBI recommendations.
The Department of Financial Services (DFS) will meet today to discuss the Reserve Bank of India’s (RBI) recommendations on the Non-Banking Financial Companies (NBFCs) sector. A key item on the agenda is the introduction of a comprehensive reform index for NBFCs.
In its annual report for FY24-25, the RBI mentioned said as a part of its ongoing efforts to strengthen systemic resilience, the Financial Stability Department (FSD) has introduced a non-banking stability map and index to assess better evolving risk factors affecting the stability of the NBFC sector.
The focus is on deepening the supervisory architecture for NBFCs and enhancing the system’s ability to withstand emerging risks. An in-house liquidity stress-testing framework for NBFCs is being developed to complement existing solvency-focused models, providing regulators with a more holistic view of sectoral vulnerabilities.
In parallel, a growth-at-risk model is being designed to help policymakers understand how current financial conditions and sectoral vulnerabilities shape the distribution of future economic growth, aiming to deepen supervisory insight, strengthen governance expectations and enhance the long-term stability of the NBFC ecosystem.
The DFS will also review the requirement for prior RBI approval for management changes in NBFCs that result in more than 30% of directors, excluding independent directors, being replaced. The discussion is expected to centre on governance reforms, including more structured leadership rotation and clearer regulatory signalling on the future trajectory of NBFCs, particularly those with a potential to transition into banks.
A senior partner at a domestic rating agency said, “This push for clarity is intended to reduce regulatory ambiguity, align expectations across stakeholders, and ensure that NBFCs evolve within a well-defined supervisory framework.”
The agenda also includes proposals to simplify KYC processes for NBFCs, ease branch-licensing norms for gold-loan NBFCs, align risk weights with banks, and reduce friction in customer onboarding and compliance.
The meeting will additionally review the current 50% haircut on bonds, with a proposal to introduce a graded haircut structure linked to credit ratings. Another key item for discussion is the creation of a Digital Payment Intelligence Platform (DPIP), which would leverage AI and cybersecurity tools to detect and prevent fraud across digital payment ecosystems.
The DFS will also discuss taxation matters, including a proposal to exempt NBFCs from TDS obligations under Section 194A and a call for increased allocation of pension funds to corporate bonds.
In its annual report for FY24-25, the RBI mentioned said as a part of its ongoing efforts to strengthen systemic resilience, the Financial Stability Department (FSD) has introduced a non-banking stability map and index to assess better evolving risk factors affecting the stability of the NBFC sector.
The focus is on deepening the supervisory architecture for NBFCs and enhancing the system’s ability to withstand emerging risks. An in-house liquidity stress-testing framework for NBFCs is being developed to complement existing solvency-focused models, providing regulators with a more holistic view of sectoral vulnerabilities.
In parallel, a growth-at-risk model is being designed to help policymakers understand how current financial conditions and sectoral vulnerabilities shape the distribution of future economic growth, aiming to deepen supervisory insight, strengthen governance expectations and enhance the long-term stability of the NBFC ecosystem.
The DFS will also review the requirement for prior RBI approval for management changes in NBFCs that result in more than 30% of directors, excluding independent directors, being replaced. The discussion is expected to centre on governance reforms, including more structured leadership rotation and clearer regulatory signalling on the future trajectory of NBFCs, particularly those with a potential to transition into banks.
A senior partner at a domestic rating agency said, “This push for clarity is intended to reduce regulatory ambiguity, align expectations across stakeholders, and ensure that NBFCs evolve within a well-defined supervisory framework.”
The agenda also includes proposals to simplify KYC processes for NBFCs, ease branch-licensing norms for gold-loan NBFCs, align risk weights with banks, and reduce friction in customer onboarding and compliance.
The meeting will additionally review the current 50% haircut on bonds, with a proposal to introduce a graded haircut structure linked to credit ratings. Another key item for discussion is the creation of a Digital Payment Intelligence Platform (DPIP), which would leverage AI and cybersecurity tools to detect and prevent fraud across digital payment ecosystems.
The DFS will also discuss taxation matters, including a proposal to exempt NBFCs from TDS obligations under Section 194A and a call for increased allocation of pension funds to corporate bonds.