RBI Revises NBFC Upper Layer Identification Framework

The amendments revise the asset-size threshold for identifying NBFC-ULs and provide for periodic review of the identification criteria.

1. Revised Asset Size Threshold for NBFC-UL

Under the amended directions, NBFCs with an asset size of Rs. 1,00,000 crore and above will qualify for inclusion in the Upper Layer.

This threshold will be used as one of the key parameters for determining whether an NBFC should be classified as an NBFC-UL.

2. Inclusion of Government-Owned NBFCs

The amendment also covers the inclusion of government-owned NBFCs in the Upper Layer framework.

This ensures that large and systemically significant government-owned NBFCs are also brought within the enhanced regulatory framework applicable to NBFC-ULs.

3. Periodic Review of Identification Criteria

RBI has provided that the criteria for identifying NBFCs in the Upper Layer must be reviewed periodically.

This will help ensure that the framework remains relevant and aligned with changes in the size, complexity and systemic importance of NBFCs.

4. Review of Asset Size Threshold Every 3 Years

The amended directions further state that the asset size threshold for identifying NBFC-ULs must be reviewed once every 3 years.

This periodic review will allow RBI to recalibrate the threshold in line with market developments and growth in the NBFC sector.

5. Objective of the Amendment

The amendment seeks to:

• Update the methodology for identifying NBFCs in the Upper Layer;
• Bring large NBFCs under enhanced regulatory supervision;
• Include government-owned NBFCs within the NBFC-UL framework;
• Ensure periodic review of identification criteria; and
• Align the framework with the evolving scale and systemic importance of NBFCs.

6. Expected Impact

The revised framework is expected to strengthen regulatory oversight over large NBFCs, including government-owned entities. It will also ensure that entities with significant asset size and potential systemic impact are subject to higher regulatory scrutiny under the Upper Layer framework.

7. Key Takeaway

RBI has amended the methodology for identifying NBFCs in the Upper Layer. Under the revised framework, NBFCs with an asset size of Rs. 1,00,000 crore and above will qualify for inclusion in the Upper Layer. The criteria for identifying NBFC-ULs will be reviewed periodically, and the asset size threshold will be reviewed every 3 years.