RBI NBFC Rules may soon become stricter for private equity firms investing in India’s non-banking financial companies.
The Reserve Bank of India (RBI) is considering a proposal that could prevent private equity investors from holding controlling stakes in more than one NBFC.
The proposed changes aim to reduce the risk of financial problems spreading across multiple lending companies if a major investment firm or one of its associated businesses faces financial difficulties.
The development could change how global private equity firms structure their investments in India’s financial services industry.
However, the proposal is still under consideration and has not been formally notified by the central bank.
What Are the Proposed RBI NBFC Rules?
Under the proposed framework, private equity firms may not be allowed to exercise controlling ownership in multiple non-banking financial companies.
The RBI is reportedly considering a distinction between controlling stakes and smaller financial investments. Holdings of 15% or less could be treated as financial investments and face comparatively lighter regulatory scrutiny.
The definition of control may extend beyond the percentage of shares owned.
An investor could also be considered to have control if it has the power to appoint a majority of directors or influence a company’s management and policy decisions.
For listed companies, a 25% shareholding is considered a controlling stake under the applicable definition discussed in the proposal. However, a smaller investment may also amount to control depending on the rights attached to it.
Why Does RBI Want to Restrict Multiple NBFC Investments?
The central bank is concerned about the possibility of financial contagion across lending companies.
Private equity firms often invest in multiple businesses through different funds and associated entities. If a major investment group experiences financial stress, the problem could potentially affect several NBFCs under its control.
Such interconnected ownership structures may create risks for the financial system, particularly when multiple lending companies depend on the same investment group for capital and strategic support.
The proposed restrictions are intended to prevent excessive concentration of control and reduce the possibility of financial difficulties spreading across different lenders.
At the same time, the RBI reportedly wants to allow smaller financial investments with fewer regulatory requirements.
This approach could help maintain investor participation while placing additional scrutiny on investors exercising significant control.
How Much Are Foreign Investors Putting Into India’s NBFC Sector?
India’s financial services industry has attracted considerable interest from international private equity investors.
Private equity investments in India’s financial sector reached approximately $5.4 billion in 2025, representing a 6% increase compared with 2024. Another $3.6 billion flowed into the sector between January and September 2026.
The growing investment activity reflects the interest of international funds in India’s expanding credit and financial services market.
Several major investment transactions have also highlighted the sector’s attractiveness.
Blackstone agreed to acquire a 16% stake in IIFL Finance for $535 million. Singapore-based Temasek also planned an investment of approximately $265 million in Godrej Capital.
These transactions demonstrate the scale of international investment activity in India’s non-bank lending industry.
Bain Capital and Mizuho Cases Highlight RBI’s Approach
The RBI has previously taken steps to prevent investors from exercising controlling ownership in multiple NBFCs.
One example involves US-based private equity firm Bain Capital. Its acquisition of a 41.7% stake in Manappuram Finance was approved subject to the condition that it divest its 93% ownership in another NBFC, Tyger Capital, formerly known as Adani Capital.
A similar issue has also emerged involving Japan’s Mizuho Financial Group, which has majority stakes in Mizuho Capsave and Credit Saison India.
Mizuho has also announced plans to acquire KKR-backed financial services firm Avendus.
The RBI has reportedly asked the Japanese financial group to submit a comprehensive plan to integrate or consolidate its existing Indian non-bank financial businesses.
What Are Private Equity Firms Demanding?
The proposed restrictions have also raised questions among private equity and venture capital investors about how they can invest through different funds within the same group.
The Indian Venture and Alternate Capital Association has approached the RBI seeking greater flexibility for separate entities within an investment group to hold stakes exceeding 20% in multiple NBFCs.
Industry representatives have argued that different funds may want to invest in fintech and financial services businesses without facing unnecessary restrictions because of their common investment group.
The RBI will need to consider these industry concerns while developing the proposed framework.
When Could the New RBI Rules Come Into Effect?
The proposed framework is not yet a final regulation. The draft rules are expected to be prepared after public consultation, allowing industry participants and other stakeholders to share their views.
According to the reported timeline, the formal rules could be issued early in 2027.
Until the RBI releases an official notification, the existing regulatory framework will continue to apply.
For private equity investors, NBFC promoters and financial companies, the final rules will be important because they could influence ownership structures, investment strategies and future acquisitions in India’s lending sector.
