Regulatory Structure of NBFCs under Scale Based Regulation by Reserve Bank of India

Non-banking Financial Companies (NBFCs) play a pivotal role in the banking sector of the country. As on 2024, there are more than 9500 NBFCs registered with RBI. Each NBFC is mandatorily required to be registered with RBI. This article specifies various types of NBFCs that can operate in India.

There are various types of NBFCs depending on their scale of operations and nature of activity undertaken by them.

There are 4 layers of NBFCs based on their size, activity and perceived riskiness:

Categorisation of NBFCs carrying out specific activity

  1. NBFC-P2P, NBFC-AA, NOFHC and NBFC not availing public funds and not having any customer interface will always remain in the Base Layer of the regulatory structure.
  2. NBFC-D, CIC, NBFC-IFC and HFC will be included in Middle Layer or the Upper Layer (and not in the Base layer), as the case may be. SPD and IDF-NBFC will always remain in the Middle Layer.
  3. The remaining NBFCs, viz., NBFC-Investment and Credit Companies (NBFC-ICCs), NBFC-Micro Finance Institutions (NBFC-MFIs), NBFC-Factors and Mortgage Guarantee Companies (MGCs) could lie in any of the layers of the regulatory structure depending on the parameters of the scale based regulatory framework.

Multiple NBFCs in a Group – Classification in Middle Layer

  • NBFCs that are part of a common Group or are floated by a common set of promoters shall not be viewed on a standalone basis. The total assets of all the NBFCs in a Group shall be consolidated to determine the threshold for their classification in the Middle Layer.
  • If the consolidated asset size of the NBFCs in the Group is ₹1000 crore and above, then each NBFC-ICC, NBFC-MFI, NBFC-Factor and MGC lying in the Group shall be classified as an NBFC in the Middle Layer and consequently, regulations as applicable to the Middle Layer shall be applicable to them.
  • However, NBFC-D, within the Group, if any, shall also be governed under the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Direction, 2016.

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