RBI Proposes New Asset Threshold for Upper Layer NBFCs
RBI proposes upper layer NBFCs to be defined by absolute asset size of ₹1 lakh crore+
The Economic Times
Image: The Economic Times
The Reserve Bank of India (RBI) has proposed a new regulatory framework for upper-layer non-banking financial companies (NBFCs) that sets an asset size threshold of ₹1 lakh crore (approximately $120 million USD). This change comes as Tata Sons seeks to deregister itself as an upper-layer NBFC, having repaid significant debt to avoid mandatory local listing.
- 01RBI proposes a new asset threshold of ₹1 lakh crore for upper-layer NBFCs.
- 02Tata Sons aims to deregister as an upper-layer NBFC to avoid mandatory listing.
- 03The new framework simplifies the identification process for upper-layer NBFCs.
- 04Government-owned NBFCs may now be classified under tighter regulations.
- 05The RBI will review the ₹1 lakh crore threshold every five years.
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The Reserve Bank of India (RBI) has proposed replacing its current classification system for upper-layer non-banking financial companies (NBFCs) with a straightforward asset size criterion of ₹1 lakh crore (approximately $120 million USD). This change is significant as it comes amidst Tata Sons' efforts to deregister itself as an upper-layer NBFC, having repaid over ₹20,000 crore (around $2.4 billion USD) to evade mandatory listing on local stock exchanges by September 2025. The RBI's new framework aims to simplify the identification process by eliminating the previous complex scoring model that combined asset ranking with various parameters. Additionally, the proposal includes removing exemptions for government-owned NBFCs, potentially subjecting large institutions like NABARD and Exim Bank to stricter regulations. As per the latest classification, major upper-layer NBFCs include LIC Housing Finance, Bajaj Finance, and Shriram Finance. The RBI plans to review the asset threshold every five years, indicating a commitment to adapt regulatory measures in response to market conditions.
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The new asset threshold could significantly affect the regulatory landscape for NBFCs in India, potentially leading to stricter oversight for large entities, including Tata Sons.
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