# RBI proposes ban on NBFC revolving credit products 2026-08-21T08:27:13+00:00 | Governance | Indian Opinion Desk Corroboration: 1 independent outlet The Reserve Bank of India has proposed an amendment that would force NBFCs to offer only term loans, effectively banning revolving credit products such as flexi loans and overdraft facilities. The draft notification, released without an explanatory rationale, has alarmed industry bodies and NBFCs, who argue revolving credit is vital for MSMEs, self-employed individuals, and salaried workers who use it to manage cash flow and pay interest only on drawn amounts. Under the proposed rule, a borrower sanctioned Rs 1 lakh would receive the full amount upfront with fixed repayment terms, rather than being able to draw and repay flexibly. Industry bodies fear this will force lenders to restructure systems and lose customers who prefer flexible borrowing. The RBI has invited stakeholder comments until August 28, 2026, leaving room for modification or withdrawal of the proposal before final notification. ## Indian Opinion Analysis The RBI's draft amendment targets a long-standing grey area where revolving credit products allowed NBFCs to keep non-performing assets (NPAs) off their books by letting borrowers draw fresh funds to service old debt. This practice, known as evergreen lending, has been flagged in several central bank financial stability reports as a systemic risk, particularly as household debt-to-GDP has climbed past 40% for the first time. The draft notification gives stakeholders until August 2026 to respond, a long window that suggests the RBI expects pushback from the NBFC sector, which earns high margins on these products. MSMEs, which rely on revolving credit for working capital, will be the most affected group, around 6.3 crore such enterprises operate in India, many with informal credit histories. The key date to watch is August 28, 2026, when public comments close. ## Coverage - bfsi.economictimes.indiatimes.com Leads with industry shock and speculation, repeats RBI's silence on rationale before offering its own theory of NPA-evergreening risk This story was synthesised by AI from the source linked above. Tags: evergreening, MSME, NBFC, RBI, revolving credit, term loan Canonical: https://indianopinion.org/rbi-proposes-ban-on-nbfc-revolving-credit-products-2/ License: Summary and commentary (c) Indian Opinion, reusable with attribution. Facts belong to the linked sources. Cite: https://indianopinion.org/rbi-proposes-ban-on-nbfc-revolving-credit-products-2/#story-in-brief Review state: restored archive article, accurate at time of publication, not offered to search indexes. How this brief was made: an AI model read the report linked above and wrote this summary and analysis, which were published automatically. Published briefs are sampled every hour by an automated quality check; the editor verifies its findings and approves corrections, and corrected briefs carry a dated correction line. We do no original reporting. Methodology: https://indianopinion.org/ai-use-policy/