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.No | Name of the NBFC | Category of the NBFC |
|---|---|---|
| 1 | LIC Housing Finance Limited | Deposit taking HFC |
| 2 | Bajaj Finance Limited | Deposit taking NBFC-ICC |
| 3 | Shriram Finance Limited (formerly Shriram Transport Finance Company Limited) | Deposit taking NBFC-ICC |
| 4 | Tata Sons Private Limited | Core Investment Company (CIC) |
| 5 | L & T Finance Limited | Non-deposit taking NBFC-ICC |
| 6 | Piramal Capital & Housing Finance Limited | Non-deposit taking HFC |
| 7 | Cholamandalam Investment and Finance Company Limited | Non-deposit taking NBFC-ICC |
| 8 | Indiabulls Housing Finance Limited | Non-deposit taking HFC |
| 9 | Mahindra & Mahindra Financial Services Limited | Deposit taking NBFC-ICC |
| 10 | Tata Capital Financial Services Limited | Non-deposit taking NBFC-ICC |
| 11 | PNB Housing Finance Limited | Deposit taking HFC |
| 12 | HDB Financial Services Limited | Non-deposit taking NBFC-ICC |
| 13 | Aditya Birla Finance Limited | Non-deposit taking NBFC-ICC |
| 14 | Muthoot Finance Limited | Non-deposit taking NBFC-ICC |
| 15 | Bajaj 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
