Now Reading: RBI Proposes Term Loans Only for Most NBFC Credit Products
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RBI Proposes Term Loans Only for Most NBFC Credit Products
The Reserve Bank of India has proposed barring non-banking financial companies from offering revolving credit, allowing only term-loan products under draft amendments to its Credit Facilities Directions. The proposal would affect flexi…
The Story in Brief
The Reserve Bank of India has proposed barring non-banking financial companies from offering revolving credit, allowing only term-loan products under draft amendments to its Credit Facilities Directions. The proposal would affect flexi loans, overdraft-style products and reusable digital credit lines, which let borrowers draw and repay funds within a sanctioned limit.
The draft defines a term loan as a fixed facility repaid through a predetermined schedule, with a limit that cannot be restored after repayment. Credit facilities outside that definition would count as revolving credit. The restriction would not cover NBFCs authorised to issue credit cards. The Times of India also reports that the draft removes provisions governing demand and call loans, including a board-policy requirement.
The Indian Opinion
Claims that the RBI is either banning all flexible borrowing or attacking fintechs go beyond the draft. Credit cards remain exempt, while the real test concerns how lenders classify and redesign existing products. Borrowers may face fewer reusable credit lines, but fixed repayment schedules can also make costs easier to track. The key number to watch is how many current NBFC products require changes once the final directions are issued.
Sources (2): bfsi.economictimes.indiatimes.com, timesofindia.indiatimes.com
This story was synthesised by AI from the 2 sources linked above.
Updated: this story now draws on 2 sources.
