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RBI Lists 16 NBFCs in Upper Layer Under Its Scale-Based Regulation

RBI lists 16 NBFCs in Upper layer under its scale-based regulation: The Reserve Bank identified 16 significant non-banking financial institutions—including LIC Housing Finance and Bajaj Finance—as upper-layer NBFCs, that will be subject to enhanced regulatory norms. 

RBI lists 16 NBFCs in Upper layer under its scale-based regulation: Key Points

  • The Reserve Bank of India (RBI) published a list of 16 upper layer non-banking finance firms (NBFC-ULs) that must follow enhanced regulations.
  • The NBFC-UL list includes the following companies: LIC Housing Finance, Bajaj Finance, Mahindra & Mahindra Financial Services, Shriram Transport, Tata Sons, L&T Finance, Indiabulls Housing Finance, Piramal Capital & Housing Finance, Cholamandalam Investment and Finance Co., Shanghvi Finance Pvt. Ltd, Muthoot Finance, PNB Housing Finance, Tata Capital Financial Services, Aditya Birla Finance, HDB Financial.
  • In order to keep a closer eye on the shadow banking industry and reduce risks for the entire financial system, the RBI stated in October 2021 to implement a four-layered regulatory structure for non-banking financial organizations (NBFCs).
  • The ongoing merger between HDFC Bank and HDFC Ltd prevented HDFC Ltd from being listed even though it was among the top 10 NBFCs in terms of asset size.
  • Within three months, these NBFCs have to create board-approved policies for the adoption of the enhanced regulatory framework that applies to all NBFCs in the upper layer and lay out an implementation strategy for complying with the new set of rules.
  • The boards of these NBFCs should make sure that the NBFC-UL requirements are followed within 24 months.

Scale Based Regulation (SBR) Framework

  • A scale-based approach was implemented by the central bank last year in response to the collapse of IL&FS in 2018 and later DHFL, which had a ripple effect on the entire financial sector, particularly in terms of liquidity issues.
  • Scale Based Regulation (SBR) framework takes into account NBFCs’ capital needs, governance guidelines, prudential regulation, and other factors.
  • The base layer, middle layer, upper layer, and top layer are the four layers of the scale-based NBFC regulation that the RBI announced in October 2021. Based on various parameters and grading, NBFCs are included in the upper layer (UL), which calls for stronger regulation.

RBI Lists 16 NBFCs in Upper Layer Under Its Scale-Based Regulation_50.1

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