The Reserve Bank of India (RBI) has taken decisive regulatory action by cancelling the Certificates of Registration (CoR) of 35 non-banking financial companies (NBFCs) and accepting the voluntary surrender of registration from 16 others, as part of its ongoing efforts to strengthen oversight, compliance, and financial stability in the NBFC sector. The move was announced in regulatory disclosures and comes into effect between early and late December 2025.

Why RBI Took Action

Under Section 45-IA(6) of the RBI Act, 1934, the central bank has the authority to grant and revoke registration for NBFCs. NBFCs must comply with regulatory requirements related to capital adequacy, reporting, corporate governance, and other prudential norms to maintain their license.

In the recent action, 35 NBFCs had their registrations cancelled by RBI primarily due to non-compliance with regulatory requirements or failure to meet the conditions under which their registrations were granted. These companies are now prohibited from conducting any business as non-banking financial institutions.

In addition, 16 NBFCs voluntarily surrendered their CoRs and chose to exit the NBFC business. Some of these firms made the decision due to business restructuring, merger or dissolution, while others met the criteria of being unregistered Core Investment Companies (CICs), which are exempt from mandatory RBI registration.

What Is an NBFC and Why Regulation Matters

NBFCs play a significant role in India’s financial ecosystem by providing credit, loans, hire-purchase financing, asset financing, and related services especially to individuals, small businesses, and sectors underserved by traditional banks.

However, unlike banks, NBFCs do not have access to certain central bank facilities, like deposit insurance or lender-of-last-resort funding. This makes strict regulatory oversight essential to safeguard depositors, creditors, and the broader financial system from risks such as credit defaults, liquidity stresses, and operational lapses.

RBI’s power to cancel registrations is a key tool in enforcing compliance and ensuring that only well-governed, financially sound institutions operate in the NBFC space.

What Happens to Affected NBFCs

Once an NBFC’s registration is cancelled, it is legally barred from carrying out activities defined under the NBFC regulation, such as lending, accepting deposits, leasing, hire-purchase transactions, or financial investments. The cancellation effectively removes the firm’s license to operate as a regulated financial institution.

Firms that voluntarily surrendered their licenses often due to business exit, reorganization, or merger typically go through a process of wind-down under legal and regulatory compliance. Remaining creditors and customers must deal with the firms’ existing obligations in line with contractual and legal requirements.

Sector Implications

This regulatory exercise underscores RBI’s continued emphasis on strengthening governance and compliance standards within the NBFC sector. The cancellations highlight how seriously the regulator views lapses in reporting, capital adequacy, and other prudential norms.

For other NBFCs, fintech lenders, and financial intermediaries, the action serves as a reminder of the importance of maintaining robust internal controls, accurate disclosures, and timely compliance with RBI’s supervisory expectations.

Customers and partner institutions should also remain vigilant, verifying the regulatory status of NBFCs on RBI’s official register before engaging in financial transactions. RBI’s public notices and press releases provide authoritative information on currently registered entities.

Looking Ahead

As India’s financial sector evolves, NBFCs continue to fill essential credit and financing roles outside the traditional banking system. But the rules of engagement are clear: sound governance, transparency, and regulatory compliance are non-negotiable. The RBI’s recent cancellation and voluntary surrender exercise in late 2025 reinforces that principle and signals that the central bank will continue to use its powers proactively to uphold financial sector integrity.