The Reserve Bank of India, vide circular RBI/DoR/2026-27/131 dated June 15, 2026, issued the Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Second Amendment Directions, 2026. These directions amend the Master Direction on NBFC financial services and will come into effect on January 1, 2027.
Background
The RBI has reviewed the extant regulations governing agency business undertaken by NBFCs and Housing Finance Companies (HFCs). The revised framework seeks to bring clarity to definitions, streamline third-party product distribution norms, and consolidate customer service and conduct requirements under the RBI (NBFCs – Responsible Business Conduct) Directions, 2025.
Key Amendments
- Revised Definition of Agency Business
The term "Agency Business" has been redefined to mean an arrangement where an NBFC acts as an agent of a Third-Party Product and Service Provider (TPPSP), without risk participation, to facilitate the sale of regulated financial products or services such as insurance, mutual funds, and pension products to its own customers. Activities covered include marketing, sales, promotion, grievance redressal, and after-sale services.
Importantly, NBFCs under agency arrangements are permitted to deal only in regulated financial products — that is, products falling under the regulatory framework of RBI, SEBI, IRDAI, PFRDA, or IFSCA (including overseas regulatory authorities).
Two new definitions have also been introduced: "Third-Party Product and Service (TPPS)" and "Third-Party Product and Service Provider (TPPSP)."
- Insurance Distribution by NBFCs
NBFCs may undertake insurance distribution business under the corporate agency or broking model without prior RBI approval, subject to the following conditions:
— Obtaining requisite registration and complying with IRDAI regulations.
— Full compliance with RBI (NBFCs – Responsible Business Conduct) Directions, 2025.
— Business to be conducted strictly on a fee basis with no risk participation, disclosed upfront to customers.
— Insurance companies whose products are distributed must have robust grievance redressal mechanisms in place.
— Only products covered under the arrangement may be listed or displayed on the NBFC's website or digital channels.
- Insurance Distribution by HFCs
HFCs with the prescribed Net Owned Fund (NOF) may also undertake insurance distribution under the corporate agency or broking model without RBI approval, subject to conditions identical to those applicable to NBFCs as outlined above.
- Mutual Fund Distribution
NBFCs distributing mutual fund products must:
— Comply with SEBI guidelines and code of conduct for mutual fund distribution.
— Adhere to RBI (NBFCs – Responsible Business Conduct) Directions, 2025.
— Operate strictly on a fee basis without risk participation, with upfront disclosure to customers.
— Ensure that the mutual funds whose products are distributed have robust grievance redressal arrangements.
— Display only such mutual fund products on their websites or digital channels that are covered under the arrangement.
- NPS / Point of Presence (PoP) Services
NBFCs other than Base Layer NBFCs that comply with the prescribed Capital to Risk-Weighted Assets Ratio (CRAR) and have earned a net profit in the preceding financial year are permitted to offer PoP services under PFRDA for the National Pension System (NPS). This must be on a fee basis, without risk participation, following registration with PFRDA and in strict compliance with PFRDA guidelines and RBI Responsible Business Conduct Directions.
Additionally, NBFCs must ensure that pension funds whose products are distributed have robust grievance redressal arrangements in place.
Omissions and Consolidation
The amendment omits Paragraphs 33, and 45 to 49 of the Master Direction, as the relevant customer service and conduct provisions are being consolidated into the RBI (NBFCs – Responsible Business Conduct) Directions, 2025.
Effective Date
These Amendment Directions shall come into effect on January 1, 2027.
Conclusion
This amendment marks a significant step towards rationalising the agency and distribution framework for NBFCs. By restricting agency business to regulated financial products, mandating fee-only models across insurance, mutual fund, and pension distribution, and consolidating conduct norms under a dedicated Responsible Business Conduct framework, the RBI has created a cleaner and more consumer-protective regulatory architecture for NBFC cross-selling activities.
Source: RBI Circular No. RBI/DoR/2026-27/131 dated June 15, 2026.
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