The RBI has proposed draft amendments to the Credit Facilities Directions for NBFCs that would limit non-banking financial companies to offering only term loans and stop them from offering revolving credit products, except for NBFCs authorised to issue credit cards. Feedback on the draft norms can be submitted until 28 August 2026.
What this changes for a title check
For an NBFC's legal and product team, this draft amendment forces an immediate audit of any credit line, flexi loan, or overdraft style product that currently lets a borrower draw down, repay, and redraw against the same sanctioned limit. Under the draft rule, only NBFCs authorised to issue credit cards, currently just SBI Card and BoB Cards, may keep offering that kind of revolving facility. Every other NBFC will have to reclassify these products as term loans, meaning the sanctioned limit cannot be restored once any part of the principal is repaid, and repayment has to follow a fixed amortisation schedule set at disbursement. Loan agreement templates that currently describe a running credit limit will need new disbursement and repayment clauses before the rule takes effect, and since the draft says the change comes into force immediately upon notification, legal teams should not wait for the August 28 comment deadline to start the redraft. Retail and MSME lending NBFCs using flexi credit as a core product face the biggest documentation rework.