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RBI releases list of 15 NBFCs in ‘Upper Layer’ under SBR

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RBI releases list of 15 NBFCs in 'upper layer'On September 15, 2023, the Reserve Bank of India (RBI) released the names of 15 Non-Banking Financial Companies (NBFCs) in the Upper Layer (UL)/NBFC-UL under Scale Based Regulation for NBFCs for the year 2023-24.

What is SBR?

In October 2021, RBI issued the Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs (the framework) which categorizes NBFCs in the following as per their asset size and scoring methodology:

i.NBFC-BL (Base Layer): It primarily consists of non-deposit-taking NBFCs with assets below Rs 1,000 crore.

NBFC Peer to Peer (P2P); NBFC-Account Aggregator (AA); Non-Operative Financial Holding Company (NOFHC): and NBFCs without public funds and customer interface will always remain in the Base Layer.

ii.NBFC-ML (Middle Layer): It comprises all deposit-taking NBFCs and non-deposit-taking NBFCs with assets exceeding Rs 1,000 crore, and NBFCs undertaking the following activities

  • Standalone Primary Dealers (SPDs)
  • Infrastructure Debt Fund – NBFCs (IDF-NBFCs)
  • Core Investment Companies (CICs)
  • Housing Finance Companies (HFCs)
  • Infrastructure Finance Companies (NBFC-IFCs)

iii.NBFC-UL (Upper Layer): The upper layer includes NBFCs specifically identified by the RBI as warranting enhanced regulatory requirements based on a set of parameters and scoring methodology. The top 10 eligible NBFCs in terms of asset size will always reside in the upper layer, regardless of other factors.

iv.NBFC-TL (Top Layer): NBFC-UL will be moved to Top Layer if RBI recognizes a substantial increase in the potential systemic risk. As of now, the Top Layer shall ideally remain empty.

The remaining NBFCs, viz., Investment and Credit Companies (NBFC-ICC), Micro Finance Institution (NBFC-MFI), NBFC-Factors, and Mortgage Guarantee Companies (NBFC-MGC) could be placed in any of the layers of the regulatory structure depending on the parameters.

  • Government-owned NBFCs shall be placed in the BL or ML. They will not be placed in the Upper Layer till further notice.

Click Here to Read more SBR regulations

Here is the list of NBFC-UL for 2023-24:

S.NoName of the NBFCCategory of the NBFC
1LIC Housing Finance LimitedDeposit taking HFC
2Bajaj Finance LimitedDeposit taking NBFC-ICC
3Shriram Finance Limited (formerly Shriram Transport Finance Company Limited)Deposit taking NBFC-ICC
4Tata Sons Private LimitedCore Investment Company (CIC)
5L & T Finance LimitedNon-deposit taking NBFC-ICC
6Piramal Capital & Housing Finance LimitedNon-deposit taking HFC
7Cholamandalam Investment and Finance Company LimitedNon-deposit taking NBFC-ICC
8Indiabulls Housing Finance LimitedNon-deposit taking HFC
9Mahindra & Mahindra Financial Services LimitedDeposit taking NBFC-ICC
10Tata Capital Financial Services LimitedNon-deposit taking NBFC-ICC
11PNB Housing Finance LimitedDeposit taking HFC
12HDB Financial Services LimitedNon-deposit taking NBFC-ICC
13Aditya Birla Finance LimitedNon-deposit taking NBFC-ICC
14Muthoot Finance LimitedNon-deposit taking NBFC-ICC
15Bajaj Housing Finance Ltd.Non-deposit taking HFC

Key Points:

i.TMF Business Services Limited, formerly Tata Motors Finance Limited, qualifies as an NBFC-UL (Non-Banking Financial Company – Upper Layer) based on scoring methodology.

  • However, it is currently not listed as an NBFC-UL in the latest review due to ongoing business reorganization.

ii.According to SBR, once an NBFC is classified as NBFC-UL, it must adhere to enhanced regulatory requirements for a minimum of five years, even if it doesn’t meet the parametric criteria in subsequent years.

Recent Related News:

i.Education financing startup, Propelld has procured a NBFC license from RBI to disburse loans worth Rs 2000 Cr by Financial Year(FY)24 and to bolster its direct lending proposition.

ii.RBI has granted NBFC licence to the Neobanking platform Jupiter enabling the latter to scale up its lending business.

About Reserve Bank of India (RBI):
Governor – Shaktikanta Das
Deputy Governors – Swaminathan Janakiraman, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar
Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra