Brief Overview:
RBI has released consolidated directions on scale based regulation for NBFCs. These directions classify NBFCs into four layers based on their size, activity, and perceived riskiness. The four layers are base layer, middle layer, upper layer, and top layer. The master direction aims to consolidate regulations on prudential, governance, and exposure aspects basis the classification of NBFCs into the aforementioned layers.
Technical Details:
1) RBI has issued a master direction on scale based regulation for NBFCs (“Master Direction”) which supersedes:
(a) the Non-Banking Financial Company–Non-Systemically Important Non-Deposit taking (Reserve Bank) Directions, 2016; and
(b) the Non-Banking Financial Company–Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
2) The said Master Direction inter alia provides for consolidated regulation on prudential, governance, exposure aspects basis classification of NBFCs into base layer, middle layer, and upper layer.
3) The Master Direction, further provides for specific directions applicable to:
(a) NBFC-Micro Finance Institutions;
(b) NBFC-Factors;
(c) NBFC-Investment and Credit Companies; and
(d) Infrastructure Debt Funds-NBFC.
For further details, please see:
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● Mr. Ankit Sinha (ankit.sinha@jclex.com)
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● Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com)
