RBI Amends 2025 Directions on Commercial Banks to Cover NBFCs and HFCs as Group Entities

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RBI 2025 Directions NBFCs and HFCs

Notification No. RBI/DOR/2025-26/135DOR.RAUG.AUT.REC.No.342/24.01.041/2025-26, Dated: 05.12.2025

1. Regulatory Background

The Reserve Bank of India (RBI) has issued the 2025 Directions to amend the earlier Commercial Banks – Undertaking of Financial Services Directions notified on November 28, 2025. These amendments fine-tune the supervisory expectations for commercial banks and their group structures, particularly in relation to non-banking business entities.

2. Applicability

The amended Directions now extend regulatory coverage to all NBFCs, including:

  • Non-Banking Financial Companies (NBFCs)
  • Housing Finance Companies (HFCs)
  • Other group entities of commercial banks operating in India

This ensures a uniform prudential discipline across financial groups where banks have ownership, control, or strategic exposure.

3. Effective Date

The amended Directions are effective from December 05, 2025.

Commercial banks and their financial group structures must align their internal compliance framework, reporting standards, capital exposure rules, and governance norms with the revised regulatory expectations from this date.

4. Regulatory Intent and Significance

The amendments aim to:

  • Enhance group-level prudential supervision
  • Create a harmonised regulatory perimeter for entities under a banking group
  • Reduce risks arising from non-core or non-bank financial activities undertaken within the group
  • Strengthen governance, ring-fencing, and capital protection mechanisms

The RBI’s updated framework reflects a consolidated supervisory approach, ensuring that financial groups led by banks do not create regulatory blind spots through subsidiaries, associates, or non-banking entities.

5. Compliance Considerations

Commercial banks should:

  • Review ownership and exposure structures relating to NBFCs and HFCs within the group
  • Ensure clear segregation between banking operations and risk-bearing non-core financial activities
  • Update internal risk management, monitoring, and governance systems
  • Align group-wide reporting and disclosures with revised RBI standards

Failure to comply may invite group-level corrective actions, tighter supervisory scrutiny, or restrictions on business expansion.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied