Summary of this article
RBI removes prior approval requirement for NBFC insurance distribution.
NBFCs must follow Irdai rules and fee-based model.
Revised framework strengthens customer protection and grievance redressal.
The Reserve Bank of India (RBI), on Monday, has allowed non-banking financial companies (NBFCs) to undertake insurance distribution business without seeking prior approval from the central bank, provided they obtain the required permission from the Insurance Regulatory and Development Authority of India (Irdai).
The move comes under the Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Second Amendment Directions, 2026, which will take effect from January 1, 2027.
Under the revised rules, NBFCs will be able to distribute insurance products either under the corporate agency model or the broking model. However, they will have to comply with all applicable regulations issued by Irdai.
“An NBFC may take up insurance distribution business, either under the corporate agency or broking model, without obtaining the approval of the RBI,” the central bank said in the notification.
Conditions For Insurance Distribution
The RBI has laid down several conditions for NBFCs undertaking insurance distribution activities. According to the directions, NBFCs must first obtain the required approval from Irdai before offering insurance products to customers.
“An NBFC shall obtain requisite permission from IRDAI and comply with the relevant IRDAI regulations,” the notification said. The regulator also clarified that the business must be conducted only on a fee basis and that NBFCs cannot take on any insurance-related risks.
“The business shall be undertaken on a fee basis without any risk participation. This shall be explicitly disclosed upfront to the customers,” the RBI said.
Further, only those insurance products that are covered under an arrangement between the NBFC and the insurer can be displayed on the NBFC’s website or digital platforms.
Customer Protection Measures
The amended framework places responsibility on NBFCs to ensure that the insurance companies whose products they distribute have adequate grievance redressal systems in place.
“It shall be ensured that the insurance companies whose products are being sold have robust customer grievance redressal arrangements in place,” the RBI said.
The directions also permit NBFCs to assist customers in resolving complaints related to insurance products.
The amendment is part of a broader review of regulations governing agency business undertaken by NBFCs. The RBI has also aligned the revised framework with its Responsible Business Conduct Directions, 2025, which contain provisions related to customer service, product sales and conduct standards.
Apart from insurance distribution, the revised directions also cover the distribution of mutual fund and pension products, subject to compliance with regulations issued by the Securities and Exchange Board of India (Sebi) and the Pension Fund Regulatory and Development Authority (PFRDA), respectively.
