RBI Issues Amendment to NBFC Concentration Risk Management Directions, 2026
The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Amendment Directions, 2026, amending the existing Directions notified in 2025. The amendment has been introduced following a review and is issued under the powers conferred by Chapter IIIB of the Reserve Bank of India Act, 1934, with the objective of refining risk management norms for NBFCs in the public interest.
The key change introduced by the Amendment Directions is the recognition of a new category of lending termed “high-quality infrastructure projects.” This classification has been inserted as a proviso to sub-paragraph 4(4) of the original Directions and is expected to have a significant bearing on how NBFCs assess and manage concentration risk arising from infrastructure exposures.
Under the amended framework, infrastructure lending may be classified as lending to high-quality infrastructure projects only if all specified conditions are satisfied. First, the project must have completed at least one year of successful commercial operations following the date of completion, without any breach of material covenants agreed with lenders. Second, the exposure must be classified as “standard” in the books of the lending NBFC, thereby ensuring asset quality discipline.
Further, the borrower’s revenue must be derived from rights granted under a concession or contract with the Central Government, State Government, public sector entities, or statutory or regulatory bodies. The contractual framework must protect these rights for the entire concession period, provided the borrower complies with its contractual obligations. Importantly, the concession or contract must offer a high degree of protection to lenders, including escrow or Trust and Retention Account (TRA) mechanisms for ring-fencing cash flows, pari-passu charge over all movable and immovable assets, and adequate risk mitigation measures in the event of early termination, such as step-in rights and minimum termination payments.
The amendment also requires that the borrower demonstrate sufficient internal or external financial arrangements to meet present and future working capital and funding requirements, as assessed by the lender. Additionally, borrowers must be contractually restricted from taking actions detrimental to lenders’ interests, such as raising additional debt or further encumbering project cash flows or assets without prior lender consent.
The Amendment Directions will come into effect from April 1, 2026, or from the date an NBFC chooses to implement the Prudential Norms on Capital Adequacy Amendment Directions, 2026, whichever is earlier. Overall, the amendment reflects RBI’s intent to encourage well-structured, low-risk infrastructure financing while strengthening concentration risk management practices among NBFCs.
