Four-tier scale-based regulatory guidelines for NBFCs from Oct 2022: RBI

Four-tier scale-based regulatory guidelines for NBFCs from Oct 2022: RBI


A revised regulation for non-banking finance companies–Scale-based Approach (SBR) for tight oversight of the

sector with assets worth Rs 54 trillion will kick in from October 01, 2022.

has set a limit of Rs one crore per borrower for financing subscriptions to Initial Public Offer (IPO). The ceiling will come into effect from April 01, 2021.

can fix more conservative limits, Reserve Bank of India said in preface to new rules.

The regulatory structure for finance companies will comprise of four layers based on their size, activity, and perceived riskiness. The lowest layer will be the base layer, followed by the middle layer and upper layer. At the apex level will be the top layer which is ideally expected to be empty.

The base layer will have non-deposit-taking with assets below Rs 1,000 crore. Finance firms working as Peer-to-Peer lending (P2P), Account Aggregators, Non-Operative Financial Holding Company (NOFHC) and entities that do not avail public funds and nor have any the customer interface will be in this layer.

The Middle Layer will consist of deposit-taking irrespective of asset size, non-deposit taking firms with

assets size of Rs 1,000 crore and above, and housing finance firms. Also, Standalone Primary Dealers (SPDs), Infrastructure Debt Fund Investment Companies (CICs) and Infrastructure Finance Companies will fall under this category.

The Upper Layer will consist of those NBFCs that warrant enhanced regulatory requirement based on a set of parameters and scoring methodology. The top-ten eligible NBFCs by asset size will always reside in the upper layer, irrespective of any other factor.

The top layer can get populated if the regulator thinks there is a substantial increase in potential systemic risk from specific NBFCs in the Upper Layer.

Government-owned NBFCs will be placed in the Base Layer or Middle Layer. They will not be placed in the Upper Layer till further notice.

The regulatory minimum Net-Owned Fund (NOF) for finance companies acting as microfinance firms and those is factoring business will be increased to Rs 10 crore.

has set a three-year glide path for the existing NBFCs to achieve the NOF of Rs 10 crore.

However, for NBFC-P2P, NBFC-AA, and those with no public funds and no customer interface, the NOF shall continue to be Rs two crore.

has revised existing norms for classifying loans as non-performing assets (NPAs). Now, the overdue more than 90 days will be regarded as NPAs for all categories of NBFCs. It has provided three-year transit period to NBFCs in Base Layer to adhere to the 90 days NPA.

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