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

Reserve Bank of India (Non-Banking Financial Companies - Prudential Norms on Capital Adequacy) Directions, 2025

28-Nov-2025 | RBI/DOR/2025-26/345 DOR.CAP.REC.264/21-01-002/2025-26

RBI has issued RBI (Non-Banking Financial Companies - Prudential Norms on Capital Adequacy) Directions, 2025 effective from 28th November 2025. Key Highlights: 1. Applicability - Applicable to all NBFCs with requirements varying based on the layer in which each NBFC is classified. 2. Minimum capital adequacy ratios - All NBFCs must follow the minimum Capital to Risk-Weighted Assets Ratio (CRAR) requirements as laid out in Annexes 1 and 2 of the Directions. They must hold extra capital to cover credit risk and market risk arising from their lending and investment activities. 3. Operational risk capital charge is mandatory - NBFCs must also maintain a capital charge for operational risk and calculate it as prescribed in Annex 2. 4. Tier 1 capital includes core equity elements - Tier 1 capital includes paid-up equity, eligible preference shares, reserves, and certain hybrid instruments, subject to RBI rules. 5. Tier 2 capital includes supplementary instruments - Tier 2 capital includes items like subordinated debt, preference shares, revaluation reserves (discounted), and general provisions, up to permitted limits. 6. Risk weights follow Basel II framework - All NBFC exposures must be assigned credit risk weights based on internationally accepted Basel II guidelines, as listed in Annex 1. 7. Market risk capital - NBFCs must calculate capital for market risk (interest rate, equity, foreign exchange risk) and add it to credit-risk weighted assets to determine total RWA (Risk-Weighted Assets). For more information, please refer to the attached document.

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