Reserve Bank of India (RBI), on Thursday, released a list of 15 NBFCs (non-banking finance companies) that will be in the 'upper layer' for the fiscal year 2024, as a part of its scale-based regulations.
The list has LIC Housing Finance on top, followed by Bajaj Finance in second place, and Shriram Finance (formerly Shriram Transport Finance Company) in third.
TMF Business Services (formerly Tata Motors Finance) did not make the list despite meeting the criteria due to an ongoing business reorganisation.
In October 2021, the RBI introduced a comprehensive four-layered regulatory structure for non-banking financial companies (NBFCs) to enforce stricter oversight of the banking sector and mitigate risks to the broader financial system. RBI framework for Scale Based Regulation (SBR), includes indicators like capital requirements, governance standards, and prudential regulation, among other aspects of NBFC operations.
The categorisation includes Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL), and Top Layer (NBFC-TL).
The upper layer encompasses NBFCs that the Reserve Bank has identified as necessitating heightened regulatory measures based on a defined set of parameters.
The RBI's decision to implement a scale-based framework was put in place after events like the collapse of IL&FS in 2018, followed by DHFL, which had cascading effects on the entire financial system, particularly in terms of liquidity challenges. This framework was put forth by RBI to make the banking system more Robust and protect it from any further occurrence of events like IL&FS crisis.