RBI Update - Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Third Amendment Directions, 2026

The Reserve Bank of India has issued the Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Third Amendment Directions, 2026, effective immediately, revising concentration risk norms applicable to NBFCs under the Scale Based Regulatory Framework. The amendment withdraws the existing exemptions from concentration norms available to Government-owned NBFCs and mandates that such entities comply with exposure limits applicable to the regulatory layer in which they are classified. Existing breaches as on the date of issuance may continue until maturity without any increase in exposure, although NBFCs in the Middle Layer and Upper Layer may exceed prudential limits where the incremental exposure is fully covered through eligible credit risk transfer instruments, resulting in zero net additional exposure. The Directions further clarify that exposures covered by State Government guarantees may be treated as exposures to the guaranteeing State Government and will be exempt from prudential exposure limits, subject to a 20% risk weight on such guaranteed exposures. Additionally, for Infrastructure Finance Companies (IFCs) classified as NBFCs in the Upper Layer, the permissible exposure limit to a group of connected counterparties has been enhanced, allowing an additional exposure of up to 20% of Tier 1 capital and increasing the overall concentration limit for such group exposures to 45%, thereby providing greater operational flexibility for financing large infrastructure projects.