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RBI's proposal to prohibit NBFCs’ revolving credit may disrupt MSME working-capital funding: FISME
Aug-26-2026

The Federation of Indian Micro and Small and Medium Enterprises (FISME) has flagged concerns over Reserve Bank of India’s (RBI) proposal to prohibit Non Banking Financial Companies (NBFCs) from providing revolving credit. It noted that blanket ban on revolving credit by NBFCs will disrupt legitimate working-capital finance used by micro, small and medium enterprises (MSMEs). Earlier this month, RBI issued 'Draft Reserve Bank of India (Non-Banking Financial Companies - Credit Facilities) Amendment Directions, 2026', in which it proposed that NBFC shall only offer credit products which are in nature of term loans and shall not offer any revolving credit products. The central bank has sought stakeholders' feedback on the draft till August 28, 2026.

FISME Secretary General Anil Bhardwaj has said that the RBI's concern regarding indefinite rollovers, hidden borrower stress and harmful app-based lending is understandable. However, working capital for a productive enterprise is economically different from consumer revolving credit. He suggested that regulation should target the risk and conduct of a product, not eliminate a legitimate financing instrument merely because it is revolving. Further, FISME highlighted the importance of NBFC credit saying, ‘NBFCs play a critical role in serving enterprises, geographies, sectors and ticket sizes that are often not adequately served by banks’.

FISME has urged the RBI to retain the objective of transparent, responsible and non-evergreened credit, but reconsider an across-the-board ban on revolving facilities by NBFCs. It suggested that the final directions should distinguish consumer convenience credit from productive working-capital finance, regulate risks through underwriting, monitoring, disclosure and data-governance requirements, and preserve NBFCs' critical role in financing market segments not adequately served by banks.

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