New Delhi: In a major move aimed at boosting entrepreneurship in the mobility sector, the central government is preparing to significantly relax the rules for starting a car rental business in India. The Ministry of Road Transport and Highways (MoRTH) has proposed reducing the mandatory minimum fleet requirement for launching self-drive and chauffeur-driven car rental services from 50 vehicles to just 5.
This significant policy shift is outlined in the newly issued draft titled ‘The Rent-A-Cab Scheme, 2026’. According to the ministry, this comprehensive framework is designed to replace the outdated rules established in 1989. The government plans to implement the new scheme starting in January 2027.
Under the existing framework, any individual or firm looking to enter the car rental sector is legally required to maintain a fleet of at least 50 vehicles, alongside having operational branches in five different cities. By scrapping the five-city branch rule and drastically lowering the initial vehicle cap, the government hopes to remove the massive capital entry barriers that have long discouraged small-scale business owners and local entrepreneurs from entering the mobility market.
The proposed regulations stipulate that an applicant must own a minimum of five motor cabs to secure a license. Furthermore, at least two of these motor cabs must be available at every designated location of business operation and maintenance.
To ensure passenger safety and legal compliance, the draft scheme has laid down stringent conditions regarding insurance and vehicle history. Every rental car must be covered by a comprehensive insurance policy. This policy must adequately cover the individual renting the vehicle, the driver, and all other passengers travelling in the motor cab up to the vehicle’s sanctioned passenger capacity.
Additionally, the rules mandate a strict background check on the vehicles used for the rental service. Cars operating under this scheme must not have any pending challans for traffic offences or violations under the Motor Vehicles Act. More importantly, none of the vehicles can be listed in the police criminal database maintained by the National Crime Records Bureau (NCRB).
By simplifying the initial setup requirements while maintaining strict safety compliance, the Rent-A-Cab Scheme 2026 is expected to create new employment opportunities and introduce fresh competition into India’s rapidly growing transport sector.