RBI’s Revised NBFC-Upper Layer Framework – At a Glance
|
The Reserve Bank of India on Wednesday amended the Scale Based Regulatory (SBR) framework for non banking financial companies, simplifying the methodology for identifying entities that fall within the Upper Layer by making asset size the sole criterion.
Under the revised framework, NBFCs with an asset size of Rs 1 lakh crore and above, based on their latest audited balance sheet, will automatically be classified as NBFC-Upper Layer entities.
The amendments replace the earlier methodology that relied on a combination of asset size, parametric scoring and supervisory assessment for identifying systemically important NBFCs requiring enhanced regulatory oversight.
Here is all you need to know:
What has changed in the identification of NBFC-UL?
The RBI has replaced the earlier multi-factor methodology with a simple asset size threshold. Going forward, any NBFC with assets of Rs 1 lakh crore and above will automatically be classified as an NBFC-UL.
Why has RBI made this change?
The move simplifies the regulatory framework and provides greater certainty to large NBFCs regarding their regulatory classification. It also removes ambiguity arising from the earlier parametric methodology and supervisory assessment process.
Will the threshold remain permanent?
The central bank said the Rs 1 lakh crore asset threshold will be reviewed every three years.
What are the changes for NBFC subsidiaries of banks?
The RBI has introduced a separate framework for NBFC group entities of Scheduled Commercial Banks. Such entities will be required to adhere to the provisions under the Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Directions, 2025, in cases where both the parent bank and the NBFC undertake the same financial activity.
What changes have been made for government-owned NBFC-ULs?
The RBI has exempted fully owned and controlled government NBFC-ULs from certain governance and financial disclosure requirements applicable to Upper Layer entities.
Why does NBFC-UL classification matter?
NBFCs in the Upper Layer are subject to enhanced regulatory requirements, including tighter governance standards, additional disclosures, concentration norms and closer supervisory oversight, bringing them closer to bank-like regulation.
When do these changes come into effect?
The amendments come into force immediately from the date of issuance.
