RBI May End NBFC Flexi Loans: What It Means for You

If you hold a flexi personal loan from a non-bank lender, the way it works may change. The Reserve Bank of India's draft directions of 6 August 2026 propose that NBFCs offer only term loans — no revolving credit, no redraw-after-repayment. The rule is not yet final, so nothing is banned today. But the two biggest lenders in this market are already redesigning their products: Bajaj Finance began rolling out term-loan variants on 1 November, and Tata Capital is testing alternatives this month. If your flexi loan converts, the change lands directly on your monthly payment.

RBI's August 2026 draft proposes that NBFCs offer only term loans, not revolving credit like flexi loans — but it is not yet notified, so nothing is banned today. Bajaj Finance and Tata Capital are already rolling out term-loan variants from November. If your flexi loan converts, your EMI jumps from interest-only to principal-plus-interest, so check your sanction letter now.

On 6 August 2026, RBI released draft "Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Amendment Directions, 2026". The key clause says an NBFC "shall only offer credit products which are in nature of term loans and shall not offer any revolving credit products". Revolving credit means any fund-based facility that is not a term loan — a limit you can draw from, repay, and draw from again. Under the draft, once you repay principal, the limit would not be restored. There is one exemption: NBFCs authorised by RBI to issue credit cards. Comments on the draft closed on 28 August 2026, and the changes would take effect immediately once the final directions are notified. They have not been notified yet. This is a proposal, not a ban — and any headline that says otherwise is wrong.

The November news is that lenders have stopped waiting. Mint reported on 4 November that Bajaj Finance and Tata Capital are rolling out and testing term-loan alternatives to flexi loans and other revolving credit lines from November 2026, as RBI shows no sign of softening the proposal. Bajaj Finance vice chairman and MD Rajeev Jain said on the company's Q2 earnings call that it would launch "a set of different variants of term loans on 1st of November" that do not allow withdrawals. Tata Capital MD and CEO Rajiv Sabharwal said the company was already testing some alternative products and would begin testing the rest in early November. Tata Capital expects to convert more than half of its flexi-credit portfolio into modified products without a revolving facility; flexi loans are about 2–2.5% of its loan book. RBI Governor Sanjay Malhotra said on 7 October that the framework was "not a new restriction, but a clarification that NBFCs had never been allowed to offer such loans". The industry is reading the signal the same way the regulator is sending it: redesign now, do not wait for the final text.

A flexi loan charges interest only on what you draw, and for an initial period you pay interest only — the principal stays untouched. A term loan charges interest on the full amount from day one, but every EMI cuts the principal. Bajaj Finserv's own worked example, updated 19 October 2026, prices both sides: a ₹4.5 lakh term loan at 13.5% over 36 months has an EMI of ₹15,271 and total interest of ₹99,752. Drawn in three stages through a flexi variant, interest in the first six months is about ₹20,250, against ₹28,626 on the term loan — before flexi charges. Flexi variants also carry a facility charge of ₹1,999 to ₹18,999 and annual maintenance of up to 0.295% of the limit (0.472% in the initial tenure for the hybrid variant). Now take Rohan, 32, sanctioned ₹5 lakh, who draws ₹3 lakh at 12% a year. Interest-only, he pays ₹3,000 a month. After 36 months he has paid ₹1,08,000 in interest and still owes the full ₹3,00,000. The same ₹3 lakh as a term loan at 12% costs an EMI of ₹9,964 over 36 months — total ₹3,58,715 — or ₹6,673 over 60 months, total ₹4,00,400. The flexi's low monthly outgo is the trap: three years of ₹3,000 a month buys zero reduction in debt.

First, your monthly payment jumps. Interest-only becomes principal-plus-interest — on the ₹3 lakh illustration above, from ₹3,000 a month to ₹9,964. Second, staged draws lose their advantage. The flexi's real benefit was paying interest only on money actually used, when costs arrive in stages; a term loan pays the full amount at once and charges interest on all of it. Third, the extra charges disappear. No facility charge, no annual maintenance — but you lose the freedom to redraw repaid amounts. Fourth, check your sanction letter now, before any conversion notice arrives. Look for the clause that lets the lender change the product structure, the rate that will apply after conversion, and whether the tenure resets. If you drew only part of your limit, ask in writing what happens to the undrawn part — under the draft, a repaid limit is not restored.

Three things the draft does not do. It does not touch bank loans: banks are not covered, so a bank overdraft or a bank flexi facility is unaffected. It does not touch credit cards: NBFCs authorised to issue credit cards are explicitly exempt, and card revolving credit continues as before. And it is not in force: the draft is a proposal, comments closed on 28 August, and the final directions have not been notified. Existing flexi loans continue on their current terms until a lender changes them or the final rule lands. The sensible move is not to panic-repay, but to know exactly what your sanction letter says and what your EMI becomes if the product converts.

Educational content only — not financial advice. Consult a SEBI-registered investment adviser for personal guidance; investments are subject to market risk.

Sources: Reserve Bank of India, draft directions, 6 Aug 2026 — NBFC (Credit Facilities) Amendment Directions, 2026. Economic Times, 4 Nov 2026 — NBFCs redesign lending models ahead of revolving credit curbs. Moneycontrol, 7 Aug 2026 — draft rules and market reaction. Bajaj Finserv, flexi vs term page, updated 19 Oct 2026.