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JC - Legal Updates - Scale Based Regulation for NBFCs

Legal Updates

25 Oct 2021

Scale Based Regulation for NBFCs

A revised regulatory framework (“Framework”) has been announced by RBI that shall be applicable to all non-banking financial companies (“NBFCs”).

The key highlights of the Framework are as follows:

1)   The regulatory structure for NBFC’s has been categorised into four layers based on their size, activity, and perceived riskiness: NBFC - Base Layer (NBFC-BL), NBFC - Middle Layer (NBFC-ML) and NBFC - Upper Layer (NBFC-UL). The Top Layer is ideally expected to be empty and will be known as NBFC - Top Layer (NBFC-TL).

2)   Regulatory minimum net owned fund requirement for NBFC-ICC, NBFC-MFI and NBFC factors is increased to INR 10,00,00,000 (Rupees Ten Crores only) to be achieved via glide path by March 31, 2027.

3)   NPA classification shall be linked overdue period of more than 90 days for all categories of NBFCs

4)   A ceiling of INR 1,00,00,000 (Rupees One Crores only) is applicable per borrower for financing subscription to initial public offer.

5)   There are certain additional regulatory requirements for NBFCs getting categorised as NBFC-ML and NBFC-UL viz. (a) Concentration of credit/ investment, Regulatory restrictions on loans, disclosure requirement etc.


For any further information, please contact Mr. Ankit Sinha (ankit.sinha@jclex.com) or Mr. Saurabh Sharma (saurabh.sharma@jclex.com).