Introduction
The Reserve Bank of India (RBI) has issued the Master Direction – Reserve Bank of India (Non-Banking Financial Company– Scale Based Regulation) Directions, 2023, which outlines the regulatory framework for Non-Banking Financial Companies (NBFCs) in India.
Objective
The objective of these directions is to create a scale-based regulatory framework for NBFCs, which will enable them to operate efficiently and effectively, while ensuring their financial stability and protecting the interests of their customers.
Key Provisions
The directions categorize NBFCs into four tiers based on their asset size, with each tier having different regulatory requirements. The tiers are:
Tier 1: NBFCs with assets less than ₹100 crore
Tier 2: NBFCs with assets between ₹100 crore and ₹1,000 crore
Tier 3: NBFCs with assets between ₹1,000 crore and ₹10,000 crore
Tier 4: NBFCs with assets above ₹10,000 crore
The directions also outline the minimum capital requirements, liquidity requirements, and governance norms for each tier of NBFCs.
Implementation
The directions will come into effect from the date of issuance, and NBFCs will be required to comply with the new regulatory framework within a specified timeframe.
The RBI will monitor the implementation of these directions and may issue further clarifications or modifications as necessary.
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