**Executive Summary**
This document, issued by the Reserve Bank of India on January 13, 2026, provides the Second Amendment Directions, 2026 to the Prudential Norms on Capital Adequacy for Non-Banking Financial Companies (NBFCs). These directions, effective immediately, modify the Master Direction to clarify the components reckoned in the computation of Owned Fund. The document is a draft for comments.
**Key Points / Main Content**
* **Purpose:** To amend the existing Master Direction to clarify the components reckoned in the computation of Owned Fund.
* **Authority:** Issued under Sections 45L of the Reserve Bank of India Act, 1934, and Section 3 read with Section 31A and Section 6 of the Factoring Regulation Act, 2011.
* **Amendment to Master Direction:**
* Paragraph 9 (iii) of the Master Direction is replaced.
* The definition of "free reserves" is revised to include quarterly profits, subject to certain conditions.
* The financial statements must be subjected to a limited review on a quarterly basis by the statutory auditors.
* Profits shall be reduced by the average dividend paid in the last three years to determine the amount that can be included.
* A formula for calculating Eligible Profit (EPt) is provided: EPt = NPt - 0.25 *D*t
* EPt = Eligible profit up to quarter 't' (t varies from 1 to 4)
* NPt = Net profit up to quarter 't'
* D = Average dividend paid during the last three years
* Losses in the current year shall be fully deducted from Owned Fund.
* **Effective Date:** The Amendment Directions are effective immediately.
**Impact Analysis**
**Stakeholder: All Non-Banking Financial Companies (NBFCs)**
* **Impact**: NBFCs are subject to revised rules regarding the inclusion of quarterly profits in the computation of Owned Fund.
* **Action Required**: NBFCs must ensure compliance with the new amendment directions, specifically regarding the calculation of Owned Funds, starting immediately. They should also prepare for quarterly reviews of their financial statements by statutory auditors, as per the new stipulations. Consider providing comments on the draft.
Key Entities Referenced
Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026: The primary subject of the document, outlining amendments to prudential norms for Non-Banking Financial Companies.
Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms on Capital Adequacy) Directions, 2025: The 'Master Direction' being amended by the current document, setting prudential norms for NBFCs.
Reserve Bank of India Act, 1934: The act that empowers the Reserve Bank of India to issue the directions in question, specifically referencing Section 45L.
Factoring Regulation Act, 2011: Act that is referenced in conjunction with the Reserve Bank of India act, specifically section 3 read with section 31A and section 6.
Non-Banking Financial Companies (NBFCs): The entities to which the amendment directions apply, and are required to follow the prescribed prudential norms.
भारतीय ररजर्व बैंक
_________________________RESERVE BANK OF INDIA ______________________
www.rbi.org.in
RBI/2025-26/___
DOR.CAP.REC.No.XX/21.01.002/2025-26 January 13, 2026
All Non-Banking Financial Companies (NBFCs)
Dear Sir / Madam,
Reserve Bank of India (Non-Banking Financial Companies – Prudential Norms
on Capital Adequacy) Second Amendment Directions, 2026 – Draft for
Comments
The Reserve Bank had issued the Reserve Bank of India (Non-Banking Financial
Companies – Prudential Norms on Capital Adequacy) Directions, 2025 (hereinafter
referred as the ‘Master Direction’), on November 28, 2025, as amended from time to
time. There is a need to further amend the same to provide clarification on the
components reckoned in the computation of Owned Fund.
2. Accordingly, in exercise of the powers conferred under Sections 45L of the
Reserve Bank of India Act, 1934 and Section 3 read with Section 31A and Section 6
of the Factoring Regulation Act, 2011, the Reserve Bank, being satisfied that it is
necessary and expedient in the public interest so to do, hereby, issues the following
Amendment Directions.
3. These Directions shall be called Reserve Bank of India (Non-Banking Financial
Companies – Prudential Norms on Capital Adequacy) Second Amendment
Directions, 2026.
4. These Amendment Directions shall come into force from immediate effect.
5. These Amendment Directions modify the Master Direction as under:
Paragraph 9 (iii) shall be replaced by:
“(iii) free reserves, including quarterly profits,
Inclusion of quarterly profits shall be subject to the following conditions:(a) The financial statements shall be subjected to limited review on a
quarterly basis by the statutory auditors.
(b) Such profits shall be reduced by average dividend paid in the last three
years and the amount which can be reckoned for inclusion would be
arrived at as under:
EP = NP - 0.25 *D*t
t t
Where:
EP = Eligible profit up to quarter ‘t’ of the current financial year, t varies
t
from 1 to 4
NP = Net profit up to quarter ‘t’
t
D = average dividend paid during the last three years
Losses in the current year shall be fully deducted from Owned Fund.”
Yours faithfully,
Sunil T S Nair
Chief General Manager
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