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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Reserve Bank of India (Non-Banking Financial Companies - Governance) Directions, 2025

28-Nov-2025 | RBI/DOR/2025-26/344 DOR.GOV.REC.No.263/18-10-013/2025-26

RBI has issued Reserve Bank of India (Non-Banking Financial Companies - Governance) Directions, 2025, effective from 28th Nov 2025. Applicability: The Directions apply layer-wise: NBFC-BL: Chapter III, NBFC-ML: Chapters II, III, IV and NBFC-UL: Chapters II, III, IV, V. (Government NBFCs are exempt from compensation provisions.) They apply to NBFC-ICC, NBFC-Factor, NBFC-MFI, NBFC-IFC, IDF-NBFC, HFCs, CICs, MGCs, SPDs and NBFC-AA/P2P to varying paragraph ranges. NOFHCs are excluded. Key Highlights: - NBFCs must adopt Board-approved policies for Fit & Proper criteria for directors, Role & responsibilities of the Chief Compliance Officer, Compensation framework including malus/clawback, and Mandatory reviews to be placed before the Board (risk, governance compliance). - Governance Requirements Applicable to ALL NBFCs a. Board Experience Requirement: At least one director must have banking/NBFC experience. b. Risk Management Committee (RMC): Mandatory at Board or executive level. c. Change in Directors/Management: -RBI prior approval needed if more than 30% of directors change (excluding independent directors). -Applications must be submitted via the PRAVAAH portal. - Requirements for NBFC-Middle Layer & Upper Layer a. Board Constitution & Director Appointment- Mandatory Fit & Proper policy, Annual declarations and ongoing due diligence, Directors must sign a detailed Deed of Covenants (Annex III), and Quarterly reporting to RBI on director changes. b. Mandatory Board Committees- Audit Committee (minimum 3 directors, aligned with Companies Act section 177), Nomination & Remuneration Committee (aligned with section 178), and Both must oversee risk alignment, director suitability, and governance compliance. - NBFCs having asset size of above 5000 cr. must appoint a Chief Risk Officer. - KMPs cannot hold positions in other NBFC-ML or NBFC-UL (except subsidiaries). - Not more than three NBFC-ML/UL directorships at the same time.

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