Vide , RBI/2021-22/112 DOR.CRE.REC. No.60/03.10.001/2021-22 circular dated October 22, 2021, All Non-Banking Financial Companies will be regulated through a framework called Scale Based Regulation (SBR) framework
These guidelines shall be effective from October 01, 2022, except the Ceiling on IPO Funding –, which is in effect from April 01, 2022- There is a ceiling of ₹1 crore per borrower for financing subscription to Initial Public Offer (IPO). NBFCs can fix more conservative limits.
REGULATORY STRUCTURE FOR NBFCS:
Based on their size, activity, and perceived riskiness NBFC are Classified in to four layers:-
NBFC Base Layer (NBFC-BL).
NBFC – Middle Layer (NBFC-ML)
NBFC – Upper Layer (NBFC-UL) and
NBFC – Top Layer (NBFC-TL) – This Layer is ideally expected to be empty.
NBFCs can undertake the following activities-
This type of Non-Banking Financial Company is not allowed to accept deposits or lend on its own.
Middle Layer: – The Middle Layer shall consist of:
(a) All deposit taking NBFCs (NBFC-Ds), irrespective of asset size,
(b) Non-deposit taking NBFCs with asset size of ₹1000 crore and above and
(c) NBFCs undertaking the following activities
The Upper Layer shall comprise of those NBFCs which are specifically identified by the Reserve Bank as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology as provided in the RBI circular.
The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor
The Top Layer:
Will ideally remain empty. This layer can get populated if the Reserve Bank is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the Upper Layer. Such NBFCs shall move to the Top Layer from the Upper Layer.
a) NBFC-P2P, NBFC-AA, NOFHC and NBFCs without public funds and customer interface will always remain in the Base Layer of the regulatory structure.
b) NBFC-D, CIC, IFC and HFC will be included in Middle Layer or the Upper Layer (and not in the Base layer), as the case may be. SPD and IDF-NBFC will always remain in the Middle Layer.
c) The remaining NBFCs, viz., Investment and Credit Companies (NBFC-ICC), Micro Finance Institution (NBFC-MFI), NBFC-Factors and Mortgage Guarantee Companies (NBFC-MGC) could lie in any of the layers of the regulatory structure depending on the parameters of the scale based regulatory framework.
d) Government owned NBFCs shall be placed in the Base Layer or Middle Layer, as the case may be. They will not be placed in the Upper Layer till further notice.