The Reserve Bank of India (RBI) has firmly rejected requests from non-banking finance companies (NBFCs) to modify regulations concerning public funds and customer interactions. The RBI clarified that any type of borrowing, regardless of its source, is classified as public funds, which carry repayment obligations and do not have loss absorbency like capital. This decision comes as part of the final guidelines for small NBFCs with an asset size of less than ₹1,000 crore (approximately $120 million USD). The RBI also stated that equity investments in group entities cannot be excluded from this classification due to the complexities of capital funding. Furthermore, the central bank rejected the suggestion to exempt loans to directors and family members from customer interface regulations, affirming that all loans attract provisions related to Know Your Customer (KYC) and credit information reporting. The RBI's stance aims to ensure that NBFCs operate with a conscious business model that minimizes reliance on public funds. Additionally, the regulator dismissed calls to eliminate the asset size threshold, viewing it as essential for maintaining systemic stability within the financial sector.