RBI announces scale-based regulations for NBFCs, to be effective from October 1
The RBI said the SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, and others.
FollowThe Reserve Bank of India (RBI) on Wednesday introduced a revised scale-based regulatory framework for non-banking financial companies (NBFCs) which shall be effective from October 01.
The RBI said the SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, and others.
As stated in the Business Standard report, in January this year, the RBI proposed segregating larger entities and exposing them to a stricter set of “bank-like” rules, aimed at protecting financial stability while ensuring that smaller NBFCs continue to enjoy light-touch regulations and grow with ease.
The RBI will first issue an integrated regulatory framework for NBFCs under SBR providing a holistic view of the SBR structure, set of fresh regulations being introduced and respective timelines, the central bank added.
In a discussion paper released on its website, the central bank had suggested a four-tier pyramid structure for the sector -- base layer, middle layer, upper layer, and a possible top layer.
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NBFCs in the lowest layer will be known as NBFC - Base Layer (NBFC-BL), while those in the middle layer and upper layer will be known as NBFC - Middle Layer (NBFC-ML) and NBFC - Upper Layer (NBFC-UL) respectively.
The top ten eligible NBFCs in terms of their asset size will always reside in the upper layer, irrespective of any other factor.
The base layer is for NBFCs with asset size upto Rs 1000 crore including NBFCs P2P and NBFC Account Aggregators, RBI said.
The middle layer is for NBFCs having asset size over Rs 1,000 crore and housing finance companies, core investment companies, infrastructure finance companies.
The upper layer NBFCs will be identified by RBI as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor, the central bank added.
Under the new framework, the RBI has also imposed a ceiling of Rs 1 crore per borrower for financing subscription to initial public offer (IPO) and NBFCs can fix more conservative limits.
It has also tweaked the non-performing asset (NPA) classification to more than 90 days for all categories of NBFCs.
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