The Reserve Bank of India (RBI) on September 14 announced the list of non-banking finance companies (NBFCs) in the upper layer under scale based regulation for NBFCs for the year 2023-24.
The list has 15 companies that include LIC Housing Finance, Bajaj Finance, Shriram Finance and Tata Sons Pvt Ltd among others.
The RBI had issued the Scale Based Regulation (SBR) on October 22, 2021. The framework categorises NBFCs in base layer, middle layer, upper layer and top layer.
Also, the regulation gives the methodology to identify the NBFCs in the Upper Layer as per their asset size and scoring methodology.
Once an NBFC is classified as NBFC-UL, it will be subject to enhanced regulatory requirement at least for a period of five years from its classification in the layer even in case it does not meet the parametric criteria in the subsequent years.
Other companies in the list include L&T Finance, Piramal Capital, Cholamandalam Finance, Indiabulls Housing, Mahindra and Mahindra Financial services, Tata Capital Financial Services and PNB Housing Finance.
HDB Financial services, Aditya Birla Finance, Muthoot Finance and Bajaj Housing Finance are also part of the list.
Despite qualifying for identification as NBFC-UL as per scoring methodology, TMF Business Services Limited (formerly Tata Motors Finance Limited) is not being included in the list of NBFC-UL in the current review due to its ongoing business reorganisation, the RBI said.
The base layer shall comprises of a non-deposit taking NBFCs below the asset size of Rs 1,000 crore while the middle layer will have asset size of Rs 1,000 crore and above.
The upper layer typically comprise of those NBFCs which are specifically identified by the RBI as warranting enhanced regulatory requirement based on a set of parameters. The top layer will ideally remain empty.
This layer can get populated if the RBI is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the upper layer, according to the regulations. Such NBFCs are moved to the top layer from the upper layer.
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