RBI master-direction RBI/DOR/2025-26/358 · 28 Nov 2025
Official title
Reserve Bank of India (Non-Banking Financial Companies – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025 (Updated as on July 01, 2026)
Summary
Check the official recordThese Directions establish a transparent procedure for Non-Banking Financial Companies (NBFCs) in the Middle Layer and above to identify and classify wilful defaulters. NBFCs must form an Identification Committee to examine evidence of wilful default and a Review Committee to finalize the classification after providing the borrower an opportunity for representation and a personal hearing. The Directions mandate reporting of large defaulters and wilful defaulters to credit information companies. NBFCs must implement penal measures against wilful defaulters, including a bar on new credit facilities and financing for new ventures. NBFCs must also monitor the end-use of funds and may commission forensic audits for accounts exceeding board-approved thresholds. These rules apply with immediate effect to specified NBFC categories.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/358 DOR.FIN.REC.No.277/20-16-003/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Non-Banking Financial Companies – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025 (Updated as on July 01, 2026)
The objective of these Directions is to provide for a non-discriminatory and transparent procedure, having regard to the principles of natural justice, for classifying a borrower as a wilful defaulter by NBFCs. The directions also aim to put in place a system to disseminate credit information about wilful defaulters for cautioning lenders to ensure that further institutional finance is not made available to them.
Accordingly, in exercise of the powers conferred by Section 45 JA, Section 45 L of the Reserve Bank of India Act, 1934; and Section 11 of the Credit Information Companies (Regulation) Act, 2005, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby, issues these Directions hereinafter specified.
(1) These directions shall be called the Reserve Bank of India (Non-Banking Financial Companies – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025. (2) These directions shall come into force with immediate effect.
(1) These Directions shall be applicable to following Non-Banking Financial Companies (hereinafter collectively referred to as ‘NBFCs’ and individually as an ‘NBFC’), categorized as NBFC-Middle Layer (NBFC-ML) and above layers: (i) NBFC-D registered with the RBI under the provisions of the RBI Act, 1934; (ii) NBFC-ICC registered with the RBI under the provisions of the RBI Act, 1934; (iii) NBFC-Factor registered with the RBI under the provisions of the Factoring Regulation Act, 2011; (iv) NBFC-MFI registered with the RBI under the provisions of the RBI Act, 1934; (v) NBFC-IFC registered with the RBI under the provisions of the RBI Act, 1934; (vi) IDF-NBFC registered with the RBI under the provisions of the RBI Act, 1934; (vii) HFC registered with the RBI under the provisions of the NHB Act, 1987; (viii) CIC registered with the RBI under the provisions of the RBI Act, 1934;
(2) These Directions are not applicable for the following: (i) MGC registered with RBI under the scheme of Registration of Mortgage Guarantee Companies (ii) NBFC-P2P registered with the RBI under the provisions of the RBI Act, 1934; (iii) NBFC-AA registered with the RBI under the provisions of the RBI Act, 1934; (iv) SPD registered with the RBI as NBFCs under the provisions of the RBI Act, 1934; (v) NOFHC registered with the RBI as NBFC under the provisions of the RBI Act, 1934; (vi) 1[NBFC holding Certificate of Registration as 'Type I NBFC'];
Provided that, the restrictions on further financial accommodation to wilful defaulters and provisions regarding large defaulters contained in these Directions, shall apply to all entities regulated by the Reserve Bank, irrespective of whether they fall within the definition of ‘lender’ as provided in these Directions or not.
(3) The applicability under these Directions is in line with the regulatory structure for NBFCs as set out in Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.
(1) In these Directions, the following definitions shall apply, unless the context otherwise requires: (i) “borrower” shall mean one who has availed credit facility from a NBFC; (ii) “credit facility” shall mean any fund based or non-fund-based facility, including off- balance sheet items like derivatives, guarantees and letters of credit (without prejudice to the provisions on non-fund based facilities contained in the Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025), which a NBFC has extended to the borrower. (iii) “credit information company” (CIC) shall mean a company that has been granted a certificate of registration under Section 5 of the Credit Information Companies (Regulation) Act, 2005. (iv) “default” shall have the same meaning assigned to it in the Reserve Bank of India (Non-Banking Financial Companies – Resolution of Stressed Assets) Directions, 2025 (v) “director” shall mean the director of a company which was classified as a large defaulter / wilful defaulter and who was associated with the company at the time when the acts of omission or commission by the company / its directors led to the default. (vi) “director identification number (DIN)” shall have the meaning assigned to it under the Companies Act, 2013. (vii) “diversion of funds” shall mean and includes the under- noted occurrences: (a) utilisation of short-term working capital funds for long-term purposes not in conformity with the terms of sanction of credit facility; (b) deploying funds availed using credit facility for the creation of assets other than those for which the credit was sanctioned; (c) transferring funds availed using credit facility to the subsidiaries / group companies or other entities, by whatever modality, without approval of the NBFC / all the lenders in the consortium; (d) routing of funds through any lender other than the NBFC or members of consortium without prior written permission of the NBFC or all the lenders of consortium; (e) investing funds availed using credit facility in other companies / entities by way of acquiring equities/debt instruments without the approval of the NBFC or all the lenders of consortium; and (f) shortfall in the deployment of funds vis-à-vis the amounts disbursed / drawn under the credit facility and the difference not being accounted for. (viii) “guarantor” shall mean a person / entity who has guaranteed the credit facility. (ix) "identification committee" shall mean the committee constituted by a NBFC for identifying a wilful defaulter and shall comprise of an officer not more than one rank below the MD/ CEO as chairperson and two senior officials, not more than two ranks below the chairperson of the committee, as members. (x) "independent director" shall have the meaning assigned to it under the Companies Act, 2013. (xi) "large defaulter" shall mean a defaulter with an outstanding amount of ₹1 crore and above, and - (a) where suit has been filed; or (b) whose account has been classified as doubtful or loss (in accordance with the instructions issued by the Reserve Bank from time to time). (xii) "lender" shall mean any of the following entities which has granted a credit facility to the borrower: (a) a commercial bank as defined under sub-sections (c), (da), and (nc) of section 5 of the Banking Regulation Act, 1949, including a Small Finance Bank, a Regional Rural Bank, and a Local Area Bank, but excluding a Payments Bank; (b) a Scheduled Primary (Urban) Co-operative Bank; (c) a non - Scheduled Primary (Urban) Co-operative Bank falling under Tier 3 and 4 in terms of the specifications contained in the Reserve Bank of India (Urban Co-operative Banks – Licensing, Scheduling and Regulatory Classification) Guidelines, 2025; (d) an All India Financial Institution, viz., Export-Import Bank of India (EXIM Bank), National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB), Small Industries Development Bank of India (SIDBI), and National Bank for Financing Infrastructure and Development (NaBFID); (e) a Non-Banking Financial Company (NBFC) falling under NBFC-Middle Layer (NBFC-ML) and above layers in terms of the specifications contained in the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Guidelines, 2025. (xiii) "nominee director" shall mean a director nominated by a lender, a regulatory authority, or the Central or a State Government. (xiv) "promoter" shall mean a person who has been named as such in a prospectus or is identified by the company in the annual return, and (a) has control over the affairs of the company, directly or indirectly, whether as a shareholder, director or otherwise; and / or (b) in accordance with whose advice, directions or instructions, the Board of Directors of the company is accustomed to act. (xv) "review committee" shall mean the committee constituted by a NBFC for the purpose of reviewing the proposal of the Identification Committee and shall comprise of the MD/ CEO as chairperson with two independent directors or non-executive directors or equivalent officials serving as members. Explanation: The Review Committee shall not be comprised of members who are part of the Identification Committee. (xix) "siphoning of funds" shall be construed to have occurred if any funds availed using credit facility from NBFC are utilised for purposes unrelated to the operations of the borrower. (xvii) “suit filed account” shall mean an account in respect of which one or more entities regulated by Reserve Bank have approached courts or tribunals (including under Insolvency and Bankruptcy Code, 2016) for recovery of their dues, and proceedings are pending. Explanation 1: An account shall be treated as suit filed if any application, appeal or execution is pending in continuation of the original recovery proceedings. Explanation 2: Suit filed accounts shall be deemed to include accounts in which proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or any other proceedings for recovery of the dues from the borrower or any other person liable to make payment of a debt under Acts governing co-operative societies are initiated and pending, and shall include the account of a debtor against whom resolution or liquidation proceedings have been initiated and are continuing. (xviii) “wilful default” (A) by a borrower shall be deemed to have occurred when the borrower defaults in meeting payment / repayment obligations to the lender and any one or more of the following features are noticed: (a) the borrower has the capacity to honour the said obligations; (b) the borrower has diverted the funds availed under the credit facility from lender; (c) the borrower has siphoned off the funds availed under the credit facility from lender; (d) the borrower has disposed of immovable or movable assets provided for the purpose of securing the credit facility without the approval of the lender; (e) the borrower or the promoter has failed in its commitment to the lender to infuse equity despite having the ability to infuse the equity, although the lender has provided loans or certain concessions to the borrower based on this commitment and other covenants and conditions. (B) by a guarantor shall be deemed to have occurred if the guarantor does not honour the guarantee when invoked by the lender, despite having sufficient means to make payment of the dues or has disposed of immovable or movable assets provided for the purpose of securing the credit facility, without the approval of the lender or has failed in commitment to the lender to infuse equity despite having the ability to infuse the equity, although the lender has provided loans or certain concessions to the borrower based on this commitment. (xix) "wilful defaulter" shall mean: (a) a borrower or a guarantor who has committed wilful default and the outstanding amount is ₹25 lakh and above, or as may be notified by Reserve Bank of India from time to time, and (b) where the borrower or a guarantor committing the wilful default is a company, its promoters and the director (s), subject to the provisions of Paragraph 5(14), or (c) in case of an entity (other than a company), persons who are in charge and responsible for the management of the affairs of the entity.
