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RBI releases list of 15 NBFCs in ‘Upper Layer’ under

In the year 2023-24, RBI released the names of 15 NBFCs that fall under the Upper Layer (UL)/NBFC-UL of the SBR. This article provides an in-depth exploration of the SBR framework, its layers, and its implications for the NBFC sector in India. In October 2021, the Reserve Bank of India (RBI) introduced a groundbreaking regulatory framework known as Scale Based Regulation (SBR) for Non-Banking Financial Companies (NBFCs). This framework aims to categorize NBFCs based on their asset size and other critical factors, providing a clear roadmap for regulation.

Understanding Scale Based Regulation (SBR)

Scale Based Regulation (SBR) is a revised regulatory framework introduced by RBI for NBFCs in India. This framework is designed to categorize NBFCs based on their asset size and activities, allowing for more tailored regulatory oversight. Here’s a breakdown of the key aspects of the SBR:

I. Base Layer (NBFC-BL)

The Base Layer primarily consists of non-deposit-taking NBFCs with assets below Rs 1,000 crore. It includes NBFC Peer to Peer (P2P), NBFC-Account Aggregator (AA), Non-Operative Financial Holding Company (NOFHC), and NBFCs without public funds and customer interface.

II. Middle Layer (NBFC-ML)

The Middle Layer encompasses deposit-taking NBFCs and non-deposit-taking NBFCs with assets exceeding Rs 1,000 crore. It also includes NBFCs engaged in specific activities such as Standalone Primary Dealers (SPDs), Infrastructure Debt Fund – NBFCs (IDF-NBFCs), Core Investment Companies (CICs), Housing Finance Companies (HFCs), and Infrastructure Finance Companies (NBFC-IFCs).

III. Upper Layer (NBFC-UL)

The Upper Layer includes NBFCs identified by RBI as warranting enhanced regulatory requirements based on specific parameters and scoring methodology. The top 10 eligible NBFCs in terms of asset size will always reside in the Upper Layer, regardless of other factors.

IV. Top Layer (NBFC-TL)

NBFCs in the Upper Layer can be moved to the Top Layer if RBI recognizes a substantial increase in potential systemic risk. As of now, the Top Layer remains ideally empty, but it serves as a contingency for increased risk.

Placement of Other NBFCs

NBFCs falling outside the predefined layers, such as Investment and Credit Companies (NBFC-ICC), Micro Finance Institutions (NBFC-MFI), NBFC-Factors, and Mortgage Guarantee Companies (NBFC-MGC), may be placed in any of the layers of the regulatory structure depending on various parameters determined by RBI.

The Implications of SBR

The introduction of the SBR framework by RBI carries significant implications for the NBFC sector in India. It allows for a more nuanced and risk-based approach to regulation, ensuring that NBFCs are subject to appropriate levels of oversight based on their size and activities. Here are some key implications:

1. Tailored Regulatory Oversight

NBFCs will receive regulatory oversight tailored to their specific risk profiles and activities, reducing the burden of excessive regulation on smaller entities while ensuring robust oversight for larger and potentially systemic NBFCs.

2. Systemic Risk Mitigation

The ability to move NBFCs to the Top Layer in the event of increased systemic risk ensures that the RBI can respond swiftly to emerging threats to financial stability.

3. Clarity and Transparency

The SBR framework brings clarity and transparency to the regulatory landscape for NBFCs, allowing market participants to better understand their obligations and requirements.

Here is the list of NBFC-UL for 2023-24:

S. No. Company Name Type Category
1 LIC Housing Finance Limited Deposit taking Housing Finance Company
2 Bajaj Finance Limited Deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
3 Shriram Finance Limited (formerly Shriram Transport Finance Company Limited) Deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
4 Tata Sons Private Limited Core Investment Company (CIC)
5 L & T Finance Limited Non-deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
6 Piramal Capital & Housing Finance Limited Non-deposit taking Housing Finance Company
7 Cholamandalam Investment and Finance Company Limited Non-deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
8 Indiabulls Housing Finance Limited Non-deposit taking Housing Finance Company
9 Mahindra & Mahindra Financial Services Limited Deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
10 Tata Capital Financial Services Limited Non-deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
11 PNB Housing Finance Limited Deposit taking Housing Finance Company
12 HDB Financial Services Limited Non-deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
13 Aditya Birla Finance Limited Non-deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
14 Muthoot Finance Limited Non-deposit taking Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC)
15 Bajaj Housing Finance Ltd. Non-deposit taking Housing Finance Company

Important takeaways for all competitive exams: 

  • Reserve Bank of India (RBI) Governor – Shaktikanta Das
  • Reserve Bank of India (RBI) Deputy Governors – Swaminathan Janakiraman, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar
  • Reserve Bank of India (RBI) Establishment – 1st April 1935
  • Reserve Bank of India (RBI) Headquarters – Mumbai, Maharashtra

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