RBI Issues List of 15 NBFCs in ‘Upper Layer’ Category

On September 14, 2023, the Reserve Bank of India (RBI) published a list containing the names of 15 Non-Banking Financial Companies (NBFCs) that fall under the upper layer of scale-based regulation (SBR) for NBFCs in the year 2023.

The Reserve Bank of India (RBI) had introduced a groundbreaking regulatory framework called Scale Based Regulation (SBR) for Non-Banking Financial Companies (NBFCs) in October 2021. This framework categorizes NBFCs based on their asset size and activities to establish a clear regulatory roadmap for these entities. The framework classifies NBFCs into four layers:

1. Base layer: It primarily comprises of non-deposit-taking non-banking financial companies that have assets below Rs 1,000 crore engaged in activities such as peer-to-peer lending, account aggregation, and non-operative financial holding companies.
2. Middle layer: It encompasses deposit-taking and non-deposit-taking NBFCs with assets more than Rs 1,000 crore. Standalone Primary Dealers (SPDs), Infrastructure Debt Fund – NBFCs (IDF-NBFCs), Core Investment Companies (CICs), Housing Finance Companies (HFCs), and Infrastructure Finance Companies (NBFC-IFCs) are also included.
3. Upper layer: It consists of Non-Banking Financial Companies (NBFCs) that have been identified by the Reserve Bank of India (RBI) as requiring stricter regulatory requirements. These requirements are determined based on specific parameters and a scoring methodology.
4. Top layer: If the Reserve Bank of India (RBI) identifies a significant rise in potential systemic risk, it has the authority to reclassify Non-Banking Financial Companies (NBFCs) in the Upper Layer to the Top Layer. Currently, the Top Layer is intentionally left empty, but it is designed to be used as a precautionary measure in case the risk level rises.

The following is a list of 15 Non-Banking Financial Companies that are classified under the upper layer.

If an NBFC is categorized as NBFC-UL, it will be subject to additional regulatory requirements for at least five years from the time it is classified in the layer, even if it does not match the parametric criteria in following years.

The introduction of the SBR framework by the Reserve Bank of India enables a more sophisticated and risk-oriented method of regulation, guaranteeing that NBFCs receive suitable levels of supervision according to their size and operations.