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Budget News

  • Reserve Bank Proposes Multiple Layer Structure To Categorise NBFCs
  • January 22,2021  17:02
  • In view of the recent stress in the Non-Banking Financial Compnies (NBFC) sector, it has become imperative to reexamine the suitability of regulatory approach, especially when failure of an extremely large NBFC can precipitate systemic risks, the RBI said today. The central bank has proposed a multiple layer structure to categorise NBFCs depending on their size and interconnectedness with the system.

    RBI stated that regulatory framework of NBFCs shall be based on a four-layered structure- Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer. Proposed regulatory framework for these layers is enumerated and it may be noted that the regulatory framework envisages a progressive increase in the intensity of regulation, noted the central bank.

    The extant regulatory framework for NBFC- Non-Deposit (NDs) will now be applicable to Base Layer NBFCs while the extant regulatory framework applicable for NBFC-NDSI will be applicable to Middle Layer NBFCs. NBFCs residing in the Upper Layer will constitute a new category. The revisions applicable to lower layers of NBFCs will automatically be applicable to NBFCs residing in higher layers, unless there is a conflict or otherwise stated.

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