Economy · 21 Aug 2026
A borrower takes a credit facility from an NBFC. The credit limit, once repaid, is immediately available for redraw again and the facility does not follow a fixed repayment schedule.
Under the RBI's draft amendment to the NBFC Credit Facilities Directions, 2025, which of the following correctly describes the regulatory status of this facility?
The RBI's draft amendment to the NBFC Credit Facilities Directions, 2025 defines term loans narrowly and restricts revolving credit to credit-card-authorised NBFCs, responding to concerns over debt evergreening in fintech-NBFC digital credit lines.
UPSC economy questions increasingly test application of a newly introduced regulatory definition to a hypothetical scenario rather than rote recall - this checks whether the aspirant actually understands the term loan/revolving credit distinction, not just that it exists.
RBI's draft amendment defines a term loan strictly (fixed schedule, no limit restoration); anything else defaults to revolving credit, which only credit-card-authorised NBFCs may now offer - aimed at curbing debt evergreening in fintech-NBFC digital credit lines while preserving KCC-style productive revolving credit.
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