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Finance > Banks & institutions > Companies (banking) > RBI
25 January 2021
Reserve Bank of India (RBI) has proposed to introduce a scale-based regulatory framework, anchored on proportionality, for non-banking financial companies (NBFCs).
RBI said the proposed regulatory and supervisory framework of NBFCs shall be based on a four-layered structure – Base Layer, Middle Layer, Upper Layer and a possible Top Layer.
If the framework is visualised as a pyramid, the bottom of the pyramid, where least regulatory intervention is warranted, can consist of NBFCs, currently classified as non-systemically important NBFCs (NBFC-ND), NBFCP2P lending platforms, NBFCAA, NOFHC and Type I NBFCs.
Moving up, the next layer can consist of NBFCs currently classified as systemically important NBFCs (NBFC-ND-SI), deposit taking NBFCs (NBFC-D), HFCs, IFCs, IDFs, SPDs and CICs. The regulatory regime for this layer shall be stricter compared to the base layer. Adverse regulatory arbitrage vis-à-vis
Regulating NBFCs: RBI proposes bank-like norms for the top 30
January 22, 2021
Suggests four-layer pyramid structure, with progressive levels of regulation
The Reserve Bank of India (RBI) plans to usher in a four-layered regulatory and supervisory framework for non-banking finance NBFCs as it embarks on the path of a scale-based regulation in the backdrop of the recent stress in the sector.
In its discussion paper on “Revised Regulatory Framework for NBFCs a Scale-Based Approach”, RBI said its proposed framework could be visualised as a pyramid, comprising NBFCs grouped in four layers Base Layer (BL), Middle Layer (ML), Upper Layer (UL) and a possible Top Layer (TL).
The Reserve Bank of India (RBI) on Friday proposed to introduce a scale-based regulatory framework for non-banking financial companies (NBFC) to segregate larger entities and expose them to a stricter set of “bank-like” rules. This is aimed at protecting financial stability while ensuring that smaller NBFCs continue to enjoy light-touch regulations and grow with ease. In a discussion paper released on its website, the central bank suggested a four-tier pyramid structure for the sector. There will be a base layer (NBFC-BL), which will have NBFCs with an asset size of up to Rs 1,000 crore, accommodating more than 95 per cent of the non-deposit taking shadow lenders. This layer will continue to enjoy regulatory arbitrage.
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