RBI Update - Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Second Amendment Directions, 2026

The Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Second Amendment Directions, 2026, effective January 1, 2027, overhaul the regulatory framework governing agency business undertaken by NBFCs and HFCs by redefining Agency Business, introducing definitions for Regulated Financial Products and Services, Third-Party Products and Services (TPPS) and Third-Party Product and Service Providers (TPPSP), and consolidating customer conduct and service-related requirements under the RBI (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025. The amendments permit NBFCs and eligible HFCs to undertake insurance distribution under corporate agency or broking models without prior RBI approval, subject to compliance with IRDAI regulations, while requiring distribution of insurance, mutual funds and NPS products to be conducted strictly on a fee-based and no-risk participation basis, with upfront disclosures, adherence to applicable sectoral regulations, robust grievance redressal arrangements by partner entities, and display only of authorised third-party products on digital channels. The Directions also omit several existing provisions relating to insurance and mutual fund distribution and strengthen governance, transparency and customer protection standards across all third-party financial product distribution activities undertaken by NBFCs and HFCs.