Let me guess how your week is going.
Someone forwarded you the RBI draft. Someone else sent a WhatsApp forward with a headline that says “ban.” Your credit head wants to know if the working-capital line is dead. Your tech head wants to know whether to start rebuilding the LMS. Your CEO wants to know what to tell the board.
The honest answer to all of them is that nobody knows the final rule yet.
But “we don’t know yet” is a bad reason to do nothing, and an equally bad reason to panic and rebuild everything. There’s a middle path. First, though, what RBI actually said, because a lot of the chatter is louder than the text.
What Did RBI Actually Propose?
On August 6, 2026, RBI released draft amendments to the NBFC Credit Facilities Directions, first issued in November 2025. The core rule (para 108A in the draft) is short: an NBFC shall offer only credit products in the nature of term loans, and shall not offer any revolving credit products.
There’s one carve-out. NBFCs authorised to issue credit cards are exempt, and right now that means just two: SBI Card and BoB Cards. Everyone else, from the large diversified lenders to small MSME-focused shops, sits on the restricted side.
The rule is one line. The definitions are the real story.
RBI didn’t leave “term loan” and “revolving credit” open to interpretation. It defined both.
A term loan is a fund-based facility of a fixed principal amount. The sanctioned limit can be disbursed in one or more instalments and is repaid on a predetermined amortisation schedule, either as periodic instalments or as a bullet payment. Once you repay principal, the limit doesn’t come back.
Revolving credit is any fund-based facility that doesn’t meet the term loan definition.
RBI isn’t handing you a list of banned products. It’s handing you a list of what’s allowed and calling everything else revolving. If you can’t show that a product is a term loan, it’s revolving by default, and the burden of proof sits with you.
And then there’s the timing
The draft doesn’t mention a transition period. Law-firm commentary reads it as taking effect immediately once the final directions are issued. What happens to existing facilities is unclear. They may run to maturity or they may need restructuring, and the draft doesn’t say. That changes how you should plan.
Why Is RBI Doing This?
The stated concerns are repayment discipline, borrower creditworthiness and loan evergreening.
Evergreening is the one worth understanding. Picture a struggling borrower who pays a little into their line, draws it right back out, and never ages into stress. A revolving line with no natural end date is a comfortable place for that to hide. A term loan has a clock on it, and every instalment either gets paid or it doesn’t.
That tells you something useful. RBI is unlikely to budge on anything that looks like perpetual credit or automatic renewal. Where it might give ground is on structured products with fixed limits and hard maturity dates.
The Industry Isn’t Taking This Quietly
The Finance Industry Development Council (FIDC) wrote to RBI on August 27, a day before the August 28 comment deadline. Its main points:
- Redraw is not evergreening. Restoring repaid principal inside a fixed-limit, fixed-maturity facility is different from rollovers, renewals and perpetual lines. FIDC backs curbs on the latter and wants room for limited redraws in the former.
- The term loan definition is too tight. Many NBFC products don’t fit it, yet they aren’t credit-card-style revolving lines or bank overdrafts either. FIDC says these are offered by NBFCs of all sizes.
- Some products need their own clarity. FIDC separately asked RBI to address supply chain finance and loan against securities, citing their specific structures and safeguards.
On September 3, FIDC and NBFC representatives met RBI Deputy Governor S C Murmu. FIDC told the regulator that the ban would affect more players and products than earlier estimates suggested. One NBFC chief executive told Business Standard that RBI may settle on a partial restriction rather than a blanket ban. The same report says the final guidelines could take about two more months while RBI assesses the feedback.
Read that as a good sign, not a guarantee. It’s one executive’s expectation, not RBI’s word.
Two Ways to Get This Wrong
Mistake #1: “We’ll start when the final rules come out.” With no transition period in the draft, that plan means starting from zero on the day the rules apply. Your borrowers will find out what changed at the same time you do.
Mistake #2: “Let’s rebuild everything now.” If the final version allows limited redraws, you’ll have torn up structures that were fine and moved customers for nothing. Then you’ll have to move them back, or explain why you didn’t.
The way through is to split your to-do list into two piles: work that pays off no matter what RBI decides, and work that pays off under only one outcome. Do the first now and park the second.
Do This Now: Work That’s Useful Either Way
1. Run every product through a four-question test
Go product by product and ask:
- Is the principal fixed at sanction?
- Is there a predetermined repayment schedule?
- Can the borrower redraw after repaying?
- Is there an automatic renewal or rollover?
A “yes” on questions 3 or 4 is a flag. If you can’t cleanly say “yes” to 1 and 2, that’s an even bigger one, because of the burden-of-proof problem. This is a day’s work for product and compliance, and it’s the most valuable item on this list.
2. Sort your book into three buckets
- Clearly revolving: cash credit, overdraft-style lines, open-ended working-capital limits. Assume these are in the crosshairs.
- Clearly term: fixed amount, fixed schedule, no redraw. You’re fine.
- The grey zone: limited-redraw structures, supply chain finance, loan against securities. These are exactly what FIDC is lobbying on. Track them, but don’t touch them yet.
3. Stop launching open-ended features
Even FIDC accepts that perpetual credit and automatic renewals deserve curbs. Don’t launch new products with those features. Nothing in the debate suggests this will be reversed, and every new product adds to the pile you might have to migrate later.
4. Write the borrower playbook before you need it
Most teams skip this, and it hurts most later. Think through the scenarios now:
- Which facilities could plausibly run to maturity?
- Which would need conversion to a term structure?
- What does the conversation with the borrower sound like, and who has it?
- What does the revised documentation look like?
A borrower used to drawing and repaying freely may now face a series of term loans. Law-firm commentary flags that replacing a revolving line with successive term loans can raise refinancing risk and borrowing costs. Your relationship managers need real answers ready, not improvised ones.
5. Get a systems estimate on the shelf
Your loan management system probably assumes limits that refresh. Find out how painful it would be to switch that off, and how long re-documentation and repricing would take. You don’t need to build anything yet. You need a number, so that when someone asks “how fast can we comply?” you have an answer.
Hold Off On This: Work That’s Risky to Guess
- Redesigning limited-redraw products. This is the main thing under negotiation. Wait for the actual redraw language.
- Supply chain finance and loan against securities. FIDC asked for specific clarity. Don’t restructure until RBI answers.
- Bulk repricing or customer migration. Doing it twice is expensive and awkward.
- Big business-model pivots. If your economics rest on revolving lines, wait for the final text before deciding what comes next.
- Assuming a grace period. The draft doesn’t provide one. If RBI adds a transition window, treat it as a bonus, not a plan.
A Rough Timeline
Based on reporting that final guidelines could take about two more months from early September, early November is a reasonable working guess. It’s an estimate, not a deadline. RBI decides when it’s ready.
- Now to mid-October: Book mapped, products bucketed, new open-ended launches frozen.
- Mid-October until the final rules: Borrower playbooks drafted, systems estimate ready, risk committee or board briefed.
- When the final text lands: Run your prepared plan against the real language. Redesign grey-zone products only now.
If this were my book, I’d do two things, in this order.
First, finish the product mapping this week. Every later decision depends on it, and it’s a small effort.
Second, resist redesigning anything in the grey zone until RBI publishes. Building feels productive and waiting feels irresponsible, but a wrong redesign costs far more than a delay of a couple of months.
Prepare now. Redesign later. Do the first part properly and the second becomes a fast, calm execution job instead of a scramble.
Your action for today: pull your full product list, run the four-question test on every line, and put the results in front of your risk and compliance heads by Friday.
This post is based on news reports and law-firm commentary on RBI’s August 2026 draft amendments. It is not legal advice. Read the draft directions yourself and consult compliance counsel before making product decisions.
Need help mapping your product book against RBI’s draft? Connect with NBFC Advisory today.
Need expert guidance? Get in touch with our consultants today.
📞 Call NBFC Advisory: +91 93287 18979
🌐 Visit: nbfcadvisory.com
