RBI Introduces Exemption Framework for Eligible NBFCs

 RBI eases the compliance burden on self-funded, non-customer-facing NBFCs by exempting those with assets below INR 1,000 crore from registration requirements, effective July 1, 2026.

The RBI has introduced the tier structure for NBFCs that do not avail public funds and have no customer interface, creating a registered track and an exemption-eligible track, based on asset size.

Category	Definition	Asset Size	Registration Status
Type I NBFC	NBFC not availing public funds and not having any customer interface, holding Certificate of Registration	INR 1,000 Crore or above	Must register with RBI
Unregistered Type I NBFC	NBFC not availing public funds, no customer interface, meeting exemption criteria	Below 1,000 Crore	Exempt – Existing NBFC Can apply for deregistration
Type II NBFC	All other NBFCs (including those availing public funds or having customer interface) other than as Type I NBFC	Any	Register with RBI

Conditions to qualify as Unregistered Type I NBFC

Condition	Details
Business Model	Must operate without public funds and without customer interface as a conscious and long-term business model, not merely incidentally.
Asset Size	Asset size must be less than INR 1,000 crore as per the latest audited balance sheet (based on audited financials under applicable accounting standards, including Ind AS, without adjustments).
Annual Board Resolution	Must pass an annual Board Resolution at the beginning of each financial year confirming it will not avail public funds and will not have customer interface during that year.
Disclosure in Notes to Accounts	Must disclose in Notes to Accounts that it is an 'Unregistered Type I NBFC', along with status of public funds and customer interface.

Eligible NBFCs must apply for deregistration by filing application before December 31, 2026. Also, NBFCs currently not fulfilling criteria but fulfilling them in future may also apply for deregistration at that time.

Another important aspect is that where multiple “unregistered Type I NBFCs” exist within the same group, their asset sizes are aggregated. If the combined total exceeds ₹1,000 crore, all such NBFC are required to obtain registration as Type I NBFCs.

This is a welcome move from the RBI to reduce the compliance burden on genuinely low-risk, self-funded NBFCs that operate as pure investment holding. However, one needs to be mindful of the definitions of 'Public Funds' and 'Customer Interface' as funds received through Group entities that themselves have access to public funds are now explicitly included within the ambit of 'Public Funds', which may catch several NBFCs off-guard.