TITLE: India's Reserve Bank Issues Third Amendment to Non-Banking Financial Company Concentration Risk Management Directions
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On June 24, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Third Amendment Directions, 2026. The amendment modifies the concentration risk management framework for non-banking financial companies (NBFCs) under the Scale Based Regulatory Framework, effective immediately upon issuance.
The amendment introduces significant changes to how government-owned NBFCs manage concentration risk. Previously, government-owned NBFCs received exemptions from concentration norms; these exemptions are now withdrawn. Government-owned NBFCs must now comply with concentration norms and limits applicable to their classification layer. Existing breaches as of the amendment's issuance date may run off until maturity, provided no further exposure is taken on those obligors. However, government-owned NBFCs in the Middle Layer or Upper Layer may exceed prudential limits if additional exposures are fully covered by eligible credit risk transfer instruments resulting in zero net incremental exposures.
The amendment also modifies exposure limits for Upper Layer NBFCs. State Government guarantee-backed exposures are now recognised as exposures to the guaranteeing State Government and exempted from prudential exposure limits, with a 20 percent risk weight applied. For investment finance companies (IFCs), the exposure limit to a group of connected counterparties increases to 20 percent of Tier 1 capital, and the group concentration limit rises to 45 percent. Additionally, paragraph 19 in the Middle Layer guidelines is deleted, and technical amendments refine the treatment of credit risk transfer instruments.
The RBI exercised its powers under sections 45JA, 45K, 45L, and 45M of the Reserve Bank of India Act, 1934, alongside provisions from the Factoring Regulation Act, 2011, and the National Housing Bank Act, 1987.