{"id":71480,"date":"2026-04-13T18:20:11","date_gmt":"2026-04-13T12:50:11","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=71480"},"modified":"2026-04-13T18:21:05","modified_gmt":"2026-04-13T12:51:05","slug":"nbfc-ul-identification-framework","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/13-04-2026\/nbfc-ul-identification-framework","title":{"rendered":"New Framework For Identifying Upper Layer NBFCs (NBFC-ULs)"},"content":{"rendered":"\n<p><strong>Syllabus:GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>In News<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The RBI released draft amendment directions to<strong> revise the methodology for identifying Non-Banking Financial Companies<\/strong> aiming to enhance transparency, simplicity, and regulatory parity.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The\u00a0 current<strong> Scale Based Regulatory (SBR) Framework <\/strong>for NBFCs prescribes a two-pronged methodology for identification of NBFC-UL viz.,\n<ul class=\"wp-block-list\">\n<li>\u00a0Top ten eligible NBFCs by asset size and parametric scoring methodology.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>This <strong>dual approach <\/strong>has been criticised for<strong> being complex and less transparent.<\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img data-dominant-color=\"d1ccc2\" data-has-transparency=\"false\" style=\"--dominant-color: #d1ccc2;\" loading=\"lazy\" decoding=\"async\" width=\"532\" height=\"460\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-79.png\" alt=\"\" class=\"not-transparent wp-image-71481\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-79.png 532w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-79-300x259.png 300w\" sizes=\"auto, (max-width: 532px) 100vw, 532px\" \/><\/figure>\n\n\n\n<ul class=\"wp-block-list\">\n<li>NBFC-UL are the <strong>entities posing significant systemic risks due to their size<\/strong>, complexity, and interconnectedness.<\/li>\n\n\n\n<li><strong>Top 10 NBFCs<\/strong> by asset size + parametric scoring methodology like Bajaj Finance, Shriram Finance, Tata Capital, Aditya Birla Finance, LIC Housing Finance.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Proposed Amendments by RBI<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Asset Size Threshold:<\/strong> Single objective criterion, NBFCs with asset size \u2265 \u20b91,00,000 crore qualify as NBFC-UL, replacing the dual methodology. Reviewed every 5 years. Enhances predictability and ease of compliance.<\/li>\n\n\n\n<li><strong>Inclusion of Government NBFCs: <\/strong>Currently placed in Base Layer (BL) or Middle Layer (ML), state-owned entities like NABARD, Exim Bank, and SIDBI will now be classified under Upper Layer based on size.\u00a0<\/li>\n\n\n\n<li><strong>State Government Guarantees:<\/strong> NBFC-UL entities may use state government guarantees as a credit risk transfer instrument without any cap (subject to conditions), providing greater flexibility in risk management.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Non-Banking Financial Company (NBFC)&nbsp;<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Definition of NBFC: <\/strong>A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act (1956 or 2013) that primarily conducts financial activities like loans, advances, leasing, hire-purchase, and investment in securities.\n<ul class=\"wp-block-list\">\n<li>NBFCs are prohibited by the Reserve Bank from associating with any unincorporated bodies<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Excluded activities<\/strong>: It does not include companies whose main business is agriculture, industry, trading goods (other than securities), services, or real estate activities.<\/li>\n\n\n\n<li><strong>Residuary NBFCs: <\/strong>Companies that mainly collect money through deposits or instalment schemes also fall under NBFCs (called residuary non-banking companies).<\/li>\n\n\n\n<li><strong>Eligibility <\/strong>\u00a0: To register with the Reserve Bank of India (RBI) as a Non-Banking Financial Company (NBFC), a company must be incorporated under the Companies Act, 1956 or 2013 and have a minimum Net Owned Fund (NOF) of \u20b910 crore.\n<ul class=\"wp-block-list\">\n<li>However, higher capital requirements apply for specialised NBFCs, such as \u20b9300 crore for NBFC-IFCs and IDF-NBFCs, \u20b9100 crore for Mortgage Guarantee Companies, \u20b920 crore for Housing Finance Companies, \u20b9150\u2013250 crore for Standalone Primary Dealers depending on activities, and \u20b92 crore for NBFC-AA and NBFC-P2P categories.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How NBFCs are Different from Banks?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>NBFCs cannot accept demand deposits.<\/li>\n\n\n\n<li>They cannot issue cheques or operate payment systems.<\/li>\n\n\n\n<li>Their deposits are not insured by DICGC.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Challenges<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Regulatory Burden: <\/strong>More entities under UL means higher compliance costs and stricter capital\/governance norms.<\/li>\n\n\n\n<li><strong>Threshold Rigidity: <\/strong>Sole reliance on asset size may ignore risk heterogeneity and qualitative factors like interconnectedness.<\/li>\n\n\n\n<li><strong>Government NBFC Impact:<\/strong> Inclusion may limit operational flexibility of public sector entities.<\/li>\n\n\n\n<li><strong>Corporate Governance Conflicts:<\/strong> Cases like Tata Sons highlight how regulatory changes can trigger ownership disputes and restructuring pressures.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Forward<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Combine asset size with risk-based indicators<\/strong> to avoid oversimplification.<\/li>\n\n\n\n<li><strong>Phased implementation for newly included entities<\/strong>, especially government NBFCs.<\/li>\n\n\n\n<li><strong>Strengthen RBI&#8217;s supervisory capacity<\/strong> for a larger NBFC-UL pool.<\/li>\n\n\n\n<li>Issue clear listing guidelines to prevent regulatory arbitrage.<\/li>\n<\/ul>\n\n\n\n<p>Source :TH<\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> In News<\/p>\n<p><\/strong><\/p>\n<li class=\"ms-5\">\nThe RBI released draft amendment directions to revise the methodology for identifying Non-Banking Financial Companies aiming to enhance transparency, simplicity, and regulatory parity.\n<\/li>\n<p><\/p>\n<p><strong><\/p>\n<p>About<\/p>\n<p><\/strong><\/p>\n<li class=\"ms-5\"\t>\nThe\u00a0 current Scale Based Regulatory (SBR) Framework for NBFCs prescribes a two-pronged methodology for identification of NBFC-UL viz.\n<\/li>\n<li class=\"ms-5\">\n\u00a0Top ten eligible NBFCs by asset size and parametric scoring methodology.<\/li>\n<p><a href=\" https:\/\/www.nextias.com\/ca\/current-affairs\/13-04-2026\/nbfc-ul-identification-framework \" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-71480","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/71480","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=71480"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/71480\/revisions"}],"predecessor-version":[{"id":71483,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/71480\/revisions\/71483"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=71480"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=71480"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=71480"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}