NBFCs in India provide consumer lending and credit products as their primary business model, and the amendment directly regulates their capital adequacy requirements for credit operations.
Low confidence — REQUIRES HUMAN REVIEW. While NBFCs may engage in some investment activities, this update focuses narrowly on capital adequacy for lending operations, not investment services or asset management.
Specialism
The update directly addresses amendments to capital adequacy norms for NBFCs, specifically modifying how Owned Fund components are calculated, which is a core Capital Adequacy regulatory requirement.
Mandatory inheritance: Capital Adequacy is a child of Prudential Standards, so Prudential Standards must be raised as the secondary tag.
2026-03-11 09:30:16·pthandapani@vixio.com
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Notifications - Reserve Bank of India
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TITLE: India's Reserve Bank Amends Capital Adequacy Norms for Non-Banking Financial Companies
BODY:
On March 10, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026, amending its Master Direction issued on November 28, 2025.
The amendment provides clarification on the components used in computing Owned Fund for non-banking financial companies (NBFCs). The key modification amends Paragraph 9(iii) of the Master Direction to permit the inclusion of quarterly profits in free reserves, subject to specific conditions. Under the revised framework, quarterly profits may be included in Owned Fund calculations only where financial statements undergo limited review or audit by statutory auditors on a quarterly basis. Additionally, such profits must be reduced by the average dividend paid over the preceding three years, with eligible profits calculated using a specified formula that accounts for net profit and historical dividend payments. The amendment clarifies that losses incurred in the current financial year are to be fully deducted from Owned Fund.
The amendment came into force with immediate effect from March 10, 2026. These changes apply to all NBFCs operating in India and are intended to enhance clarity regarding capital adequacy calculations and ensure more accurate measurement of Owned Fund components. The RBI issued the directions under Section 45L of the Reserve Bank of India Act, 1934 and Section 3 read with Section 31A and Section 6 of the Factoring Regulation Act, 2011.
**Reference:**
Reserve Bank of India Notification RBI/2025-26/226, March 10, 2026