NBFC Body FIDC Asks RBI To Ease Restrictions On Revolving Credit

The Finance Industry Development Council (FIDC), which represents non-banking finance companies (NBFCs), has asked the Reserve Bank of India (RBI) to reconsider proposed restrictions on revolving credit products, Reuters reported.

RBI earlier this month proposed allowing NBFCs to offer revolving loans only if they are authorised to issue credit cards. Its draft guidelines would otherwise limit NBFCs to term loans. FIDC said the proposed restriction could affect working-capital finance for micro, small and medium enterprises (MSMEs), loans against securities and other credit products. Revolving credit allows borrowers to draw, repay and draw again within a sanctioned limit. The industry body also asked the RBI to revise its definition of term loans, arguing that restrictions on replenishing credit limits after principal repayment could increase interest and operating costs for small businesses.

FIDC has proposed allowing NBFCs to restore repaid principal before the contractual schedule, subject to safeguards.