RBI Clarifies Tier 1 Capital Computation for NBFCs

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  • Last Updated on 12 March, 2026

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RBI Tier 1 capital computation

Press Release: 2025-2026/2241 Dated 10.03.2026

The Reserve Bank of India (RBI) has issued Amendment Directions clarifying the computation of Owned Fund/Tier 1 Capital for Non-Banking Financial Companies (NBFCs) and Asset Reconstruction Companies (ARCs) in relation to Credit and Investment concentration norms.

The revisions aim to remove interpretational ambiguities and ensure uniformity in the application of prudential limits across regulated entities.

1. Background of the Amendments

The changes follow stakeholder feedback on draft directions issued in January 2026. After reviewing the comments received and examining the existing regulatory provisions, the RBI has introduced clarifications to the framework governing capital computation for concentration limits.

2. Clarification on Capital Base for Exposure Limits

The amendment provides clarity on how Owned Fund/Tier 1 Capital should be computed for the purpose of applying credit and investment concentration norms.

This capital base is used to determine the permissible exposure limits that NBFCs and ARCs can maintain with respect to borrowers, groups of borrowers, or investment exposures.

3. Applicability Across Multiple Prudential Frameworks

The amendments have been incorporated across multiple prudential frameworks applicable to NBFCs and related entities regulated by RBI. These revisions ensure consistency in the interpretation of capital definitions used for calculating exposure limits.

4. Objective of the Amendment

The revised directions seek to:

  • Provide regulatory clarity on the computation of Owned Fund / Tier 1 Capital
  • Ensure consistent application of concentration norms across NBFCs and ARCs
  • Address industry concerns raised during stakeholder consultation
  • Strengthen prudential oversight and risk management in the NBFC sector.
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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied