RBI Clarifies Tier 1 Capital Computation for NBFCs

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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