RBI has issued a master circular on financing of NPFCs by Banks, consolidating all previous instructions. The Reserve Bank of India has gradually deregulated the credit-related activities of banks. Most areas of bank financing of NBFCs have been deregulated, in line with the goal of giving banks more operational independence in the area of credit dispensation and in the context of mandatory registration of NBFCs with the Reserve Bank. However, because of the sensitivity surrounding the funding of certain types of operations carried out by NBFCs, limits on such financing remain in place. Now, banks may extend need based working capital facilities as well as term loans to all NBFCs registered with RBI and engaged in infrastructure financing, equipment leasing, hire-purchase, loan, factoring and investment activities subject to such conditions as specified. Banks can also extend financial assistance to support the factoring business of Factoring Companies, which comply with the criteria as specified in the said master circular.

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