RBI Categorizes NBFCs Under Scale-Based Regulation, LIC Housing Finance Tops The List (Image: rbi.org)
15 non-banking financial companies (NBFCs) have been placed under the upper layer as the Reserve Bank of India (RBI) on Thursday categorized them based on the scale-based regulatory (SBR) framework for 2023-24. Some of the NBFCs in the upper layer include LIC Housing Finance, Bajaj Finance, and Tata Sons.
There are four layers under the SBR framework, which was created, considering various aspects such as capital requirements, governance standards, and prudential regulation, among others. Non-deposit taking NBFCs with low asset base (Below Rs1000) are primarily under base layer while all deposit-taking NBFCs and non-deposit-taking NBFCs with assets exceeding Rs 1,000 crore are placed under middle layer.
The base layer NBFCs normally have peer-to-peer lending, account aggregation, and non-operative financial holding companies under its portfolio. The upper layer consists of NBFCs specifically identified by the RBI as warranting enhanced regulatory requirements based on a set of parameters and scoring methodology. Normally, the top 10 eligible NBFCs are categorized as upper layer, and it will have to undergo stringent regulatory measures, for at least five years.
However, it exempted to meet the parametric criteria in subsequent years. According to the RBI, the top layer may ideally stay empty. However, the top layer could be populated if the central bank believes that a particular NBFC has significantly increased its potential systemic risk. In such scenario upper layer NBFCs will be promoted to to the top layer. It is based on the 2021 norms.
The Top Upper Tier For 2023-24 As Categorized By RBI
1 *LIC Housing Finance
2 *Bajaj Finance
3 *Shriram Finance (formerly Shriram Transport Finance Company)
4 #Tata Sons Private Limited
5 L & T Finance
6 Piramal Capital & Housing Finance
7 Cholamandalam Investment and Finance Company
8 Indiabulls Housing Finance
9 *Mahindra & Mahindra Financial Services
10 Tata Capital Financial Services
11 *PNB Housing Finance
12 HDB Financial Services
13 Aditya Birla Finance
14 Muthoot Finance
15 Bajaj Housing Finance Ltd.
*Deposit taking NBFC
#Core Investment Company
TMF Business Services (formerly Tata Motors Finance) has not been included in the current list because of the ongoing business reorganization.
