Open Access Research Article

REGULATION OF NBFCs IN INDIA: EVOLVING LEGAL FRAMEWORK AND REGULATORY CHALLENGES

Author(s):
SAMUDRANIL CHAKRABARTI SAHIL SAMANTA
Journal IJLRA
ISSN 2582-6433
Access Open Access
Volume 3
Issue 6
DOI https://www.doi-ds.org/doilink/09.2026-26289325/REGULATION OF NBFCs IN INDIA: EVOLVING LEGAL FRAME
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Abstract

ABSTRACT
The regulation of non-banking financial companies (NBFCs) in India has undergone a structural transformation over the last decade, moving from a light-touch, entity-based licensing regime under Chapter III-B of the Reserve Bank of India Act, 1934 to a graduated, risk-calibrated architecture built on the Reserve Bank's Scale Based Regulation (SBR) framework. The collapse of Infrastructure Leasing & Financial Services in 2018 and the subsequent resolution of Dewan Housing Finance Corporation exposed the systemic consequences of a sector that had grown large and deeply interconnected with banks while remaining materially under-regulated. The legislative and regulatory response has been substantial: enhanced supervisory powers under the Finance (No. 2) Act, 2019, the extension of the Insolvency and Bankruptcy Code to financial service providers, the four-layered SBR framework of 2021, a Prompt Corrective Action regime, consolidated Digital Lending Directions, and, most recently, a proportionality-driven recalibration exempting small, non-public-funded NBFCs from registration. This paper examines that trajectory doctrinally, argues that the Indian framework has largely closed the regulatory arbitrage gap between banks and NBFCs, and contends that the residual regulatory challenge is no longer under-regulation but policy cyclicality, supervisory capacity, and bank-NBFC interconnectedness. It concludes that predictability of prudential policy, statutory articulation of the SBR layers, and a resolution framework tailored to non-deposit-taking NBFCs are the reforms India now requires, rather than further layers of prescriptive rulemaking.

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Author Details

Authors: SAMUDRANIL CHAKRABARTI & SAHIL SAMANTA
Registration ID: 1013115 | Published Paper ID: IJLRA13115 & IJLRA13116
Year: Sep-2026 | Volume: 3 | Issue: 6
Approved ISSN: 2582-6433 | Country: Delhi, India
Page No.: 306-318

Article Information

REGULATION OF NBFCs IN INDIA: EVOLVING LEGAL FRAMEWORK AND REGULATORY CHALLENGES

Authors: SAMUDRANIL CHAKRABARTI, SAHIL SAMANTA

  • Journal IJLRA
  • ISSN 2582-6433
  • Volume 3
  • Issue 6
Citation Download Paper Full Details Search on Google Search on Google Scholar

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International Journal for Legal Research and Analysis

  • AbbreviationIJLRA
  • ISSN2582-6433
  • AccessOpen Access
  • LicenseCC 4.0

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