Last Updated on: 29th July 2026 | Last Reviewed on: 29th July 2026
This guide is general information on Indian law, not legal advice. For your company’s specific position, speak to a qualified AML professional.
Hire purchase companies are reporting entities under the Prevention of Money-Laundering Act, 2002. A hire purchase company is a non-banking financial company that finances the acquisition of assets on hire-purchase terms, where the customer hires goods, such as vehicles, plant or equipment, and acquires ownership on paying the final instalment. As a category of NBFC, its AML, CFT and CPF duties flow from the PMLA, the PML (Maintenance of Records) Rules, 2005, the RBI Non-Banking Financial Companies KYC Directions, 2025, Section 51A of the UAPA, Section 12A of the WMD Act, and the FIU-IND reporting framework. The Reserve Bank of India supervises hire purchase companies, and reports are filed with FIU-IND.
Key takeaways at a glance
- Who is covered: hire purchase companies, that is, non-banking financial companies carrying on hire-purchase or asset finance, are reporting entities under the PMLA and subject to RBI directions and supervision.
- Why they are caught: a non-banking financial company is expressly included within the financial-institution definition in section 2(1)(l) of the PMLA, so a hire purchase company is a reporting entity under section 2(1)(wa). No separate designation is needed.
- Governing laws: the PMLA, 2002 and the PML (Maintenance of Records) Rules, 2005; the RBI (Non-Banking Financial Companies – Know Your Customer) Directions, 2025; the UAPA 1967 (Section 51A) and the WMD Act, 2005 (Section 12A).
- Supervisor: the Reserve Bank of India (RBI). Reports go to the Financial Intelligence Unit – India (FIU-IND); the Enforcement Directorate (ED) enforces the PMLA.
- Core duties: an internal risk assessment, customer due diligence and KYC, beneficial-owner identification, periodic updation, monitoring, prescribed-transaction reporting, five-year record-keeping and sanctions screening.
The core instruments at a glance
Instrument | What it does for a hire purchase company |
PMLA, 2002 | The parent Act. Identifies the non-banking financial company within the financial-institution definition and defines the core duties of CDD, record-keeping and reporting. |
PML (Maintenance of Records) Rules, 2005 | Elaborates on what to report and when, how to identify customers and beneficial owners, and the obligation to appoint officers. |
RBI NBFC KYC Directions, 2025 | The company’s working rulebook, issued by the RBI on 28 November 2025 and updated as on 29 December 2025, applicable to all NBFC categories. |
RBI Internal Risk Assessment Guidance (2024) | Requires the company to run an ML/TF risk assessment whose outcome goes to the board. |
UAPA Section 51A and WMD Act Section 12A | Prescribes targeted financial sanctions for terrorism and proliferation financing. |
FATF Recommendations 9 to 23 | Sets standards on an international level and lays out preventive-measures for financial institutions that India’s framework is built to meet. |
What counts as a hire purchase company in India?
A hire purchase company is a non-banking financial company whose principal business is financing the acquisition of assets on hire-purchase terms. Under a hire-purchase arrangement, the customer takes possession of an asset, most commonly a vehicle, machine or piece of equipment, and pays for it in instalments, the legal ownership remains with the financier until all the instalments and any agreed purchase option are paid, after which the ownership passes to the customer.
Under the Reserve Bank’s current classification, the companies engaged principally in hire-purchase finance are regulated as Investment and Credit Companies. They are regulated and supervised by the RBI as NBFCs. This guide addresses the hire-purchase finance companies under the PMLA, distinct from the banks that also offer asset finance.
The money-laundering risk of a hire purchase company is that of an asset-finance lender. It sits in the source of the down-payment and the instalments, which may be paid in cash; in the use of financing to lend a legitimate face to illicit funds, for example by settling a facility early with unexplained cash; and in the identity and beneficial ownership of a corporate borrower behind an asset. The AML framework therefore leans on identifying the borrower and any beneficial owner, on understanding the source of funds, and on watching for unusual settlement patterns.
Are hire purchase companies reporting entities under the PMLA?
Yes. The Prevention of Money-Laundering Act, 2002 creates the offence of money laundering and places core duties on reporting entities. A non-banking financial company is expressly named within the financial-institution definition in section 2(1)(l) of the PMLA. Section 2(1)(wa) defines reporting entity to include a financial institution. So, a hire purchase company is a reporting entity under the PMLA. No notification under section 2(1)(sa) is needed; a hire purchase company is inside the regime as an NBFC.
This places a hire purchase company in the same broad category of reporting entities that file with FIU-IND as banks and other financial institutions, and within the wider AML laws and regulations for financial institutions in India. The obligations are calibrated to the size of the business, but the status is not optional.
Supervisory authority for hire purchase companies in India
The supervisor for hire purchase companies is the Reserve Bank of India, which registers and supervises them as NBFCs and issues the KYC and AML directions they work from.
On 28 November 2025, the RBI issued its consolidated, category-specific KYC Directions, and the Reserve Bank of India (Non-Banking Financial Companies – Know Your Customer) Directions, 2025, updated as of 29 December 2025, that apply to all categories of NBFC, including hire purchase companies. The RBI Internal Risk Assessment Guidance of 2024 sits alongside them as the basis of the risk-based approach.
The Financial Intelligence Unit – India receives, analyses and disseminates the reports a hire purchase company files, and the Enforcement Directorate investigates and prosecutes the offence of money laundering under the PMLA. In short, the RBI sets and supervises the rules, FIU-IND receives the intelligence, and the ED enforces the criminal law.
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AML Regulatory Requirements for Hire Purchase Companies in India
The law that governs a hire purchase company does not sit in one place. It is a layered framework, and it helps to see it grouped as the official source set groups it: the core legislation, the overarching infrastructure, the sectoral supervisor and its directions, the miscellaneous official reports, the international standards, and the allied laws. Each category below lists the instruments that apply, with a short note on what each does for a hire purchase company.
The framework reads from the core outward. The PMLA is the parent Act; the PML Rules turn it into operational duties; the RBI Directions translate both into instructions a hire purchase company can follow; the UAPA and the WMD Act add counter-terrorism and proliferation-financing sanctions; and the allied laws, including each institution’s guidelines, shape the risk. The risk-based approach further reinforces and strengthens the entire framework
Core Legislation
The primary statutes and rules that create the AML, CFT and CPF obligations, grouped into three sub-sets.
AML Legislation
Prevention of Money-Laundering Act, 2002 (PMLA)
India’s primary statute on anti-money-laundering and that sets the reporting entity status for a hire purchase company. It defines the offence of money laundering and imposes the duties, customer due diligence under Section 11A and record-keeping under Section 12, that a hire purchase company should apply across its acquisition and resolution business. Because a hire purchase company deals in the settlement of acquired debts and the sale of security, its exposure sits in the source of settlement funds and the identity and beneficial ownership of asset buyers, which is where the Act bites.
The PML (Maintenance of Records) Rules, 2005 (PMLR)
The rules made under the PMLA, and the layer a hire purchase company applies day to day. Rule 3 and Rule 8 set what to report and when, Rule 9 sets the manner of identification for customers and beneficial owners, while Rule 7 imposes the duty to appoint a Principal Officer and Designated Director. The PMLR has been amended through 31 Gazette notifications and orders, which are elaborated below.
The 31 PMLR amendment notifications, in date order:
Gazette notification and date | Key change or rule touched |
G.S.R. 389(E), 24 May 2007 | The first round of amendments to the 2005 Rules. It enlarged the scope of the Rule 2 test for a suspicious transaction by including dealings without economic rationale or bona fide purpose and those signaling terrorism financing. It additionally reshaped Rule 3 pertaining to cash dealings of forged or counterfeit nature, replaced Rule 8 with the need to furnish information to the Director, and eased Rule 9 to one certified copy. |
G.S.R. 816(E), 12 November 2009 | A far-reaching overhaul. It introduced the non-profit organisation and Regulator definitions, restated the suspicious transaction, and required reporting of NPO receipts over Rupees 10 lakh. Under Rule 6 it fixed ten-year record retention, and it rebuilt Rule 9 to mandate beneficial-owner identification, ongoing due diligence, a ban on anonymous accounts and a Client Identification Programme. |
G.S.R. 76(E), 12 February 2010 | Refined several Rules including Rules 3, 4, 5 and 7 to strengthen record-keeping and the reporting cross-references. Furthermore, it inserted the first Explanation in Rule 9(1A), that defines the beneficial owner. |
G.S.R. 508(E), 16 June 2010 | Overhauled Rules 2, 9 and 10, the definitions, customer due diligence and record-keeping, revised how a reporting entity identifies customers and the records it holds… |
G.S.R. 980(E), 16 December 2010 | The small account regime was introduced by this amendment notification. It laid out the definitions for Designated Officer and the small account. It included the the NREGA job card and the Aadhaar letter as officially valid documents in Rule 2, and inserted Rule 9(2A) elaborating the opening and monitoring of such an account. |
G.S.R. 481(E), 24 June 2011 | Introduced a short title as a result the PMLR is used. |
G.S.R. 576(E), 27 August 2013 | Overhauled Rules 2 and 3 and included provisions after Rule 10, addressing definitions, reporting duties pertaining to cash and suspicious transaction and set the record framework to match the reporting obligations. |
G.S.R. 288(E), 15 April 2015 | Revised the Rule 2 definitions and thus set who and what the operative rules.. |
G.S.R. 544(E), 7 July 2015 | Changed Rules 2, 9 and 10 pertaining to definitions, customer due diligence and record-keeping, revising customer identification and record-keeping for reporting entity. |
G.S.R. 730(E), 22 September 2015 | This amendment notification revised Rules 2 and 7, the definitions and the need for a Principal Officer and an internal reporting mechanism. |
G.S.R. 882(E), 18 November 2015 | It amended the provisions on definitions and reporting, it also revised how key terms are read and how transactions reach the FIU. This was the last amendment of 2015. |
G.S.R. 347(E), 12 April 2017 | This amendment revised Rule 2 and incorporated Rule 9A, added the Central KYC Records Registry into the Rules, creating the obligation to file customer KYC records centrally and reuse them. |
G.S.R. 538(E), 1 June 2017 | Overhauled Rules 2 and 9 to include Aadhaar into customer due diligence, prescribing its use in identification and authentication for KYC. |
G.S.R. 1038(E), 21 August 2017 | It changed the Rule 2 definitions, which further revised the defined terms that govern how the operative rules apply, among several definition changes in 2017. |
G.S.R. 1318(E), 23 October 2017 | A later revamp 2017 of the Rule 2 definitions, arranged the defined terms as the framework moved on. |
G.S.R. 456(E), 16 May 2018 | Changed the definitions and customer due diligence provisions, explained coverage and how customers are identified and verified, within the continuing adjustment of the CDD framework. |
G.S.R. 1078(E), 31 October 2018 | This amendment revised Rule 9 and changed the stages a reporting entity follows to identify and verify customers and beneficial owners. |
G.S.R. 108(E), 13 February 2019 | It revised Rules 2 and 9 on definitions and customer due diligence, as a result of legislative changes to Aadhaar use, revising the ways identification could be conducted. |
G.S.R. 381(E), 28 May 2019 | It revamped Rule 9 by revising the identification and verification process and the routes to confirm the identity of customer due to Aadhaar reshaping CDD. |
G.S.R. 582(E), 19 August 2019 | It changed Rules 2 and 9 and inserted provisions after Rule 11, spanning definitions, customer due diligence and the supporting provisions pertaining to information and records. |
G.S.R. 669(E), 18 September 2019 | This amendment revised definitions and CDD process under Rules 2 and 9 again.. |
G.S.R. 840(E), 13 November 2019 | This amendment incorporated further changes to the identification and verification requirements under Rule 9. This was the last change for the year 2019. |
G.S.R. 228(E), 31 March 2020 | Overhauled the definitions and reporting provisions, revising defined terms and the manner of reporting transactions. |
G.S.R. 251(E), 13 April 2020 | Revamped Rule 8, which outlined how transaction reports are furnished to the FIU. |
G.S.R. 254(E), 16 April 2020 | This amendment notification alongside the previous one strengthened the reporting provisions and reports to be submitted to the FIU. |
G.S.R. 798(E), 28 December 2020 | This is to be read along with G.S.R. 799(E) and 800(E) which were published on the same day, it designated real estate agents and dealers in precious metals and stones and appointed their regulator. |
G.S.R. 575(E), 13 July 2022 | Added the International Financial Services Centre definition with a tailored beneficial-owner provision for IFSC entities and inserted an IFSC proviso into Rule 9A on the CKYCR, aligning the Rules with the GIFT City regime. |
S.O. 1074(E), 7 March 2023 | An amendment that added major definitions such as that of politically exposed persons, non-profit organisations and group and a Rule 3A duty for group-wide AML policies, and cutting the company beneficial-ownership threshold from 25 to 10 per cent, with a matching change to Rule 9(3)(e), of direct relevance to a hire purchase company financing a corporate borrower. |
G.S.R. 652(E), 4 September 2023 | The second amendment in 2023. It assigned the Principal Officer at management level designation, cut the partnership beneficial-ownership threshold to 10 per cent, inserted an Explanation of control, and necessitated trustees to disclose their status, and added the results obtained by way of Rule 3 and Rule 9 analysis to the records kept. |
G.S.R. 745(E), 17 October 2023 | Overhauled Rules 2, 3, 8 and 9 in this singular notification, spanning definitions, the reporting duties and customer due diligence, adjusting several operative provisions together.. |
G.S.R. 419(E), 19 July 2024 | Rewrote Rule 9(1C) on the KYC Identifier and set a seven-day deadline to update a CKYCR record provided any changes have been made, added a duty to fetch the updated record, and overhauled Rule 9A(2)(g) on filing, retrieving and using registry records, sharpening how current central KYC data is kept. |
The PML (Manner of Receiving the Records Authenticated Outside India) Rules, 2005
Rules for accepting customer records authenticated outside India, relevant where a hire purchase company finances a non-resident borrower or a foreign-owned corporate customer and must rely on identity and ownership documents executed and certified abroad.
CFT Legislation
The Unlawful Activities (Prevention) Act, 1967 (UAPA)
India’s statute on counter-terrorism. Section 51A requires a hire purchase company to screen both customers and beneficial owners against the designated lists and to freeze, without delay, the funds and assets of listed persons and entities, whatever the size of the exposure.
Procedure for implementation of Section 51A of the UAPA (order dated 2 February 2021; corrigenda dated 15 March 2023 and 29 August 2023)
The official procedure a hire purchase company follows to apply Section 51A. The RBI Directions that incorporate the screening and freezing steps into the institution’s controls, turning the statutory order into a workable process.
The Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 (WMD Act)
India’s statute that addresses counter–proliferation financing. Section 12A provides the legal support for targeted financial sanctions relating to the financing of weapons of mass destruction, and affects a hire purchase company, particularly where an acquired asset or a settlement has a cross-border dimension.
Procedure for implementation of Section 12A of the WMD Act (dated 1 September 2023)
The official procedure for applying Section 12A mirrors the Section 51A screening and freezing steps that must be applied by a hire purchase company alongside its terrorism-list screening.
The WMD and their Delivery Systems (Prohibition of Unlawful Activities) Implementation Rules, 2016
Rules implementing the WMD Act and supporting the proliferation-financing controls a hire purchase company must operate.
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Overarching Obligations
The shared national obligations that a hire purchase company fulfils as a reporting entity.
CERSAI Central KYC Records Registry (CKYCR) Operating Guidelines, 2025
The Central KYC Records Registry is a centrally designed system that stores customer KYC records. A hire purchase company uploads to it and can reuse a customer’s existing record, keeping KYC consistent and reducing duplication. Getting beneficial ownership and identity data right for an institutional customer at onboarding is a key requirement for the importance of the registry.
FINnet 2.0 reporting formats (2024) and the FINGate 2.0 user manuals
The reporting platform for Regulated Entities in India is the FIU-IND. Its current formats, through which a hire purchase company enrols and files, are covered in the FINGate 2.0 manuals covering enrolment, request-response and reports.
Section Aadhaar Authentication Procedure for Reporting Entities (9 May 2019)
The procedure for reporting entities other than banking companies to apply to use Aadhaar authentication services, relevant where a hire purchase company verifies an individual’s identity through Aadhaar.
Sectoral Guidelines
The supervisor and its directions. The Reserve Bank of India regulates hire purchase companies and issues the KYC Directions the institution works from, read with its consolidated master directions and internal-risk-assessment guidance.
Reserve Bank of India
The RBI (Non-Banking Financial Companies - Know Your Customer) Directions, 2025
The hire purchase company’s working rulebook, and the most important instrument on this page. Issued by the RBI on 28 November 2025 and updated as on 29 December 2025, the Directions apply to all categories of non-banking financial company, for all layers, and to their branches and majority-owned subsidiaries, and set out customer identification and due diligence, beneficial-owner identification, periodic updation, the ML and TF risk assessment, the appointment of a Designated Director and Principal Officer, reporting, record management and the implementation of Sections 51A and 12A. Where this article states a duty at the level of the law, the Directions are where a hire purchase company finds the detail.
RBI Consolidated Master Directions and the KYC compliance notification (28 November 2025)
On 28 November 2025 the RBI issued its consolidated master directions and a notification on compliance with KYC norms, under which the category-specific KYC Directions for hire purchase companies were made and earlier KYC directions stand repealed or superseded to the extent provided.
RBI Internal Risk Assessment (IRA) Guidance for ML/TF Risks (2024)
The RBI guidance that calls the internal risk assessment the bedrock of the risk-based approach and requires its documented outcome to go to the board, applied by every hire purchase company in preparing and updating its risk assessment.
RBI Frequently Asked Questions on NBFCs
The RBI question-and-answer guidance on non-banking financial companies, updated as on 10 February 2026, which explains the categories, registration and conduct of NBFCs and is a useful reference for a hire purchase company confirming its classification and the directions that bind it.
Miscellaneous official Reports and Guidance
Official reports and guidance that sit outside the binding rulebook but shape how a hire purchase company reads its risk and its duties.
FIU-IND Annual Report 2024-25
The national FIU’s annual account of the reports it received, analysed and disseminated, a useful read on reporting volumes and priorities across reporting-entity types.
Directorate of Enforcement Annual Report 2025-26
The Enforcement Directorate’s annual account of investigations, provisional attachments and prosecutions under the PMLA, showing how the criminal-enforcement end of the framework is used.
FIU-IND and its Core Functions and FAQs
A plain-language explanation of what FIU-IND does and how reporting works, a useful primer for an institution’s reporting function.
MHA National Counter-Terrorism Policy and Strategy
The Ministry of Home Affairs statement of national counter-terrorism policy, which frames the CFT duties that Section 51A places on a hire purchase company.
International Standards
The global benchmarks India is measured against, and the sources a hire purchase company can use to calibrate a risk-based approach.
FATF Recommendations
The international AML, CFT and CPF standards. Recommendations 9 to 23 set the preventive measures for financial institutions, and Recommendation 6 on targeted financial sanctions was updated by FATF in June 2026. India’s framework for hire purchase companies is built to meet them.
FATF Mutual Evaluation Report on India, 2024 (and Executive Summary)
The assessment of India’s AML and CFT system, which examined how the financial sector’s preventive measures and supervision work in practice.
Basel Committee, Sound Management of Risks Related to Money Laundering and Financing of Terrorism (2014, revised July 2020)
The Basel Committee guidance on managing ML and TF risk, a benchmark for the risk-based approach and group-wide controls that a hire purchase company can read across to its own risk management.
FATF Risk-Based Approach Guidance for the Banking Sector (2014)
FATF sector guidance on applying the risk-based approach in banking and financial institutions, useful to a hire purchase company in shaping its customer due diligence and monitoring.
Allied Laws
The wider body of law that defines each institution’s own mandate and the predicate offences and enforcement machinery around money laundering. A hire purchase company operates under the RBI Act, 1934, while the predicate and enforcement Acts shape the risk it must assess and the conduct it may need to report.
The allied laws that most often bear on a hire purchase company’s risk are the Reserve Bank of India Act, 1934 (which defines a non-banking financial company and underpins RBI supervision) and the Factoring Regulation Act, 2011.
Alongside these, the predicate-offence and enforcement laws that shape a hire purchase company’s money-laundering risk are the Companies Act, 2013, the Bharatiya Nyaya Sanhita, 2023 and the Bharatiya Nagarik Suraksha Sanhita, 2023, the Foreign Exchange Management Act, 1999, the Benami Transactions (Prohibition) Act, 1988, the Prevention of Corruption Act, 1988, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Fugitive Economic Offenders Act, 2018, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Foreign Contribution (Regulation) Act, 2010, the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, the Arms Act, 1959, the Chemical Weapons Convention Act, 2000 and the Central Vigilance Commission Act, 2003.
Core AML/CFT/CPF Obligations for Hire Purchase Companies in India
Across that framework, the regulations require a hire purchase company to do the following. This article keeps each at the level required by law; a compliance requirements guide explains how to do each.
- Register with FIU-IND. Enrol on the FINnet 2.0 / FINGate 2.0 portal so the institution can file its reports.
- Appoint officers. Appoint a Designated Director and a management-level Principal Officer under Rule 7 of the PMLR and the RBI Directions. The same person cannot hold both roles, and both are informed to FIU-IND and the RBI.
- Conduct the internal risk assessment. Run an ML and TF risk assessment across customers, products, channels and geographies, document it, and take its outcome to the board, as the RBI Directions and the IRA Guidance require.
- Document AML policy, controls and procedures. Adopt a board-approved policy that turns the risk assessment into the institution’s operating procedures.
- Customer identification and CDD. Identify and verify every customer and the beneficial owner (a controlling interest of more than 10 per cent for a company or partnership, and more than 15 per cent for an unincorporated association or body of individuals, with the separate trust test), with enhanced due diligence for politically exposed persons and high-risk customers, under Section 11A of the PMLA, Rule 9 of the PMLR and the RBI hire purchase company KYC Directions 2025. Given the asset-finance business, the identification of borrowers and any beneficial owner, and the scrutiny of the source of down-payments and instalments, are central.
- Ongoing monitoring and periodic updating. Monitor transactions on an ongoing basis, and refresh KYC at least once every 2, 8 and 10 years for high, medium and low-risk customers. Review each customer’s risk categorisation at least once every six months.
- Sanctions screening. Screen customers and beneficial owners against the designated lists under Section 51A of the UAPA and Section 12A of the WMD Act, and freeze and report any match, verifying the relevant UNSC and domestic lists daily.
- Regulatory reporting. File cash transaction reports for cash above Rupees 10 lakh, suspicious transaction reports of any value, counterfeit-currency reports and, where a hire purchase company finances a cross-border transaction, cross-border wire transfer reports of Rupees 5 lakh or more where applicable, under Rule 3 read with Rule 8 of the PMLR. Cash and related reports are generally filed monthly, by the 15th day of the succeeding month; suspicious transaction reports are filed promptly, through FINnet 2.0.
- Record management, CKYCR and FINnet 2.0. Keep transaction records for five years from the date of the transaction, and identity records, account files and correspondence for five years after the relationship ends, under Section 12 of the PMLA. Upload customer KYC records to the CKYCR under Rule 9A, and file all prescribed reports through FINnet 2.0.
- Training and awareness. Train staff by role to apply the controls and recognise red flags in asset finance, such as cash down-payments and early settlements.
- Independent testing and audit. Test the programme through internal audit, compliance assurance or independent review, and close every finding.
- Run group-wide controls. Where the institution has subsidiaries, apply AML and CFT programmes at group level, including for branches and majority-owned subsidiaries, as the RBI Directions require.
What this article does not cover
This article explains the laws and regulatory instruments that apply to hire purchase companies. It does not provide a control-by-control compliance manual, nor does it restate each institution’s own establishing statute or its developmental mandate, except where they bear on the AML duties. For implementation, a hire purchase company separately documents customer acceptance, KYC and CDD procedures, beneficial owner identification, sanctions screening, transaction monitoring, suspicious transaction escalation, staff training, audit testing and board reporting. Those controls are the subject of the companion compliance guide.
To see how the hire purchase company framework fits within the sector, see AML laws and regulations for financial institutions in India, and to place it within the national picture, see AML laws and regulations in India.
From regulation to compliance: your next step
Knowing the law is step one. These obligations only protect an institution when they are built into a working programme of risk assessment, policy, customer due diligence, monitoring, screening, reporting, training and independent review. For a hire purchase company, the identification of borrowers and asset buyers and their beneficial owners and the scrutiny of the source of settlement funds are the controls that matter most. Understanding the stages of money laundering and how the sanctions screening process works is a useful starting point.
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Frequently Asked Questions
A non-banking financial company whose business is asset finance on hire-purchase terms, where the customer takes possession of an asset such as a vehicle, machine or piece of equipment and pays for it in instalments, acquiring ownership on the final payment. It is regulated by the RBI as an NBFC and is a reporting entity under the PMLA.
Yes. A hire purchase company is a reporting entity under section 2(1)(wa) of the PMLA because it is a financial institution within section 2(1)(l), which takes its meaning from section 45-I of the RBI Act, 1934. No separate notification is needed; a hire purchase company is inside the regime by virtue of what it is.
The Reserve Bank of India (Non-Banking Financial Companies – Know Your Customer) Directions, 2025, issued on 28 November 2025 and updated as of 29 December 2025. They apply to all categories of NBFC, including hire purchase companies, and their branches and majority-owned subsidiaries, and are read with the RBI Internal Risk Assessment Guidance of 2024.
A hire purchase company deals mainly with corporate borrowers, selling banks and the buyers of acquired assets rather than retail customers over a counter, so its customer due diligence centres on those parties and their beneficial owners, and on the source of settlement funds. Where a hire purchase company deals with individual borrowers or buyers, ordinary KYC applies. The full AML framework applies in either case.
Cash transaction reports for cash above Rupees 10 lakh, suspicious transaction reports of any value, counterfeit-currency reports and, where a hire purchase company finances a cross-border transaction, cross-border wire transfer reports of Rupees 5 lakh or more where applicable. Cash and related reports are filed monthly by the 15th of the succeeding month, and suspicious transaction reports promptly, through FINnet 2.0.
Yes. The screening duties under Section 51A of the UAPA and Section 12A of the WMD Act apply to every hire purchase company, whatever the size of the exposure. A hire purchase company screens customers and beneficial owners against the United Nations and domestic designated lists and freezes and reports any match.
Official sources and review
Last reviewed: July 2026. This guide is grounded in the following primary official sources, linked to their official source where available.
Why work with AML India
AML India helps hire purchase companies meet their PMLA and RBI obligations, from risk assessment and policy through to CDD, screening, monitoring, reporting, training and independent review.
Industries we serve: hire purchase and asset-finance companies, NBFCs, housing finance, mortgage guarantee and asset reconstruction companies, insurers, payment system operators and aggregators, banks, DNFBPs, securities intermediaries and IFSC and GIFT City entities.
About the Author
Pathik Shah
FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)
Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.
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