RBI proposes ban on NBFC revolving credit — what it means if you use a flexi loan

The Reserve Bank of India on August 6, 2026 released draft norms that would bar most non-banking financial companies (NBFCs) from offering revolving credit products — including flexi loans, reusable credit lines and overdraft-style facilities — and restrict them to plain term loans with a fixed repayment schedule instead, according to Business Standard.

What changes

Under the draft, once a term loan is disbursed and part or all of the principal is repaid, the sanctioned limit cannot be restored or reused. That is the defining feature of a term loan — the opposite of a flexi/revolving line, where you repay and redraw the same limit repeatedly.

The only carve-out is for NBFCs authorised to issue credit cards — currently just SBI Card and BoB Financial Solutions (BoB Cards) — which can continue offering revolving credit through their card products.

Who is affected

Reusable credit lines, overdraft facilities and flexi-loan products offered by NBFCs across corporate, MSME and unsecured personal loan segments are all in scope. Large NBFCs known for flexi-loan books, such as Bajaj Finance, would need to redesign these products if the norms are finalised as drafted — NBFC stocks fell on the news, per Business Standard.

Why RBI is doing this

Flexi/revolving credit lines let borrowers draw, repay and redraw funds without a fixed amortisation path, which RBI has flagged as harder to monitor for over-leverage compared to a standard term loan with a set schedule. The draft is part of a broader push to standardise how NBFCs structure credit exposure.

What borrowers should do now

• This is a draft, not a final rule. Public feedback is open until August 28, 2026; existing flexi loans are not affected yet.
• If you currently hold an NBFC flexi loan or overdraft-style credit line, check with your lender on how existing facilities would be treated if the norms are finalised — RBI drafts typically clarify transition timelines before implementation.
• If you’re evaluating a new loan, compare a fixed-schedule term loan’s EMI against your cash flow using the EMI calculator, since flexi options may become harder to find from NBFCs going forward.
• Banks (as opposed to NBFCs) are not covered by this specific draft, so bank-issued overdrafts and credit cards are unaffected for now.

Source: Business Standard, August 6–7, 2026