NBFC credit may rise as the central bank eases risk rules from April 2025, shows RBI Bulletin

The credit flow to non-banking financial companies (NBFCs) may rise again following the withdrawal of additional risk weights on bank lending from April 2025, stated the Reserve Bank of India Bulletin, issued on October 20, 2025.

The bulletin notes that NBFCs remain one of the largest recipients of bank credit within the services sector, highlighting their renewed role in transmitting liquidity to retail and small business borrowers.

The RBI Bulletin explains that bank credit to NBFCs has improved significantly following the withdrawal of additional risk weights effective April 2025.

The RBI noted that lending to NBFCs slowed in 2024 because of stricter capital requirements. However, with the reversal of these measures it has made it easier for banks to lend to the sector. This easing is intended to improve financial intermediation and reduce borrowing costs for end-users, according to the RBI.

According to the RBI bulletin, the central bank elaborated on its decision to introduce a “principle-based framework for rationalising risk weights for infrastructure lending by NBFCs."

The following framework will help align risk weights with the actual risk characteristics of operational infrastructure projects, promoting better risk assessment and capital allocation.  According to the RBI bulletin, "This adjustment is intended to enhance risk assessment, improve capital allocation, and foster long-term funding stability in the NBFC sector."

Moreover, the bulletin noted that the overall financial strength of NBFCs remains solid, highlighting that “system-level parameters of NBFCs are sound, with adequate capital and improved GNPA ratios.”

As per the bulletin, until June 2025, the total capital-to-risk weighted assets ratio (CRAR) of NBFCs was 25.69%, while gross NPAs decreased to 2.23%. This shows consistent improvement from the last year.

As stated in the RBI Bulletin, the central bank’s recalibration of NBFC risk weights and rollback of earlier restrictions highlight its dedication to balancing prudent regulation with supporting credit growth.

This policy move, it said, is expected to “further enhance liquidity conditions, lower funding costs, and support credit transmission across the financial system” in the upcoming quarters.