Overview
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) based on their scale of operations.
Objective
The objective of these directions is to create a scale-based regulatory framework that recognizes the difference in risks and complexities of NBFCs based on their size, activity, and interconnectedness.
Classification of NBFCs
NBFCs will be classified into three categories based on their asset size:
Base Layer: NBFCs with assets less than ₹1,000 crore
Middle Layer: NBFCs with assets between ₹1,000 crore and ₹10,000 crore
Upper Layer: NBFCs with assets above ₹10,000 crore
Regulatory Requirements
The regulatory requirements for NBFCs will vary based on their category, with more stringent requirements for Upper Layer NBFCs.
These requirements include capital adequacy, liquidity, governance, and risk management, among others.
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.
Chat with the Master Direction: