RBI’s New Regulatory Framework for NBFCs: Scale Based Regulation Directions 2023
26 Oct 2023
- DMD Advocates
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RBI vide circular dated October 19, 2023, has issued Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 (NBFC Directions) which outlines the new regulatory framework for NBFCs.
The NBFC Directions intend to consolidate various regulations for NBFCs of different scales and functions in one place and eliminate the classification of ‘systemically important’ NBFCs. The consolidation has streamlined various regulations governing the different layers of NBFCs bringing clarity to compliance requirements and ensuring that all NBFCs operate within a framework that is consistent and transparent. The NBFC Directions also require the top 15 NBFCs to list on stock exchanges.
Under the erstwhile framework, even the relatively smaller sized finance companies were classified as systemically important because of the definition which included NBFCs with assets over INR 500 crores. This has now been done away with. Under the NBFC Directions, NBFCs with over INR 1,000 crore assets are part of the mid-layer, and only the top 10 NBFCs form part of the upper layer to which the stringent conditions will apply.