RBI to Revamp NBFC Classification Framework, Governor Malhotra Announces
RBI to introduce new framework for NBFC classification, says guv Malhotra
Business Standard
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The Reserve Bank of India (RBI) will soon introduce a new framework to classify non-banking financial companies (NBFCs) into upper, middle, and lower layers, as announced by Governor Sanjay Malhotra. This change aims to enhance regulatory compliance and adapt to the evolving financial landscape.
- 01RBI will introduce a new classification framework for NBFCs into upper, middle, and lower layers.
- 02Current classification under the scale-based regulation (SBR) framework includes four layers.
- 03The upper layer for 2024-25 includes major players like Bajaj Finance and Tata Capital.
- 04Proposed exemptions for small NBFCs with assets under ₹1,000 crore from registration.
- 05Eligible NBFCs can apply for voluntary deregistration by September 30, 2026.
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The Reserve Bank of India (RBI) is set to implement a new framework for the classification of non-banking financial companies (NBFCs) into upper, middle, and lower layers, as stated by Governor Sanjay Malhotra during a post-monetary policy press conference. This new framework will replace the existing scale-based regulation (SBR) framework, which categorizes NBFCs into four layers based on size, systemic importance, and risk profile. Currently, the upper layer for the fiscal year 2024-25 includes major players such as Bajaj Finance, Shriram Finance, and Tata Capital, as well as housing finance companies like LIC Housing Finance. Additionally, the RBI has proposed to exempt small NBFCs with no public funds and assets below ₹1,000 crore (approximately $120 million USD) from mandatory registration, allowing them to apply for voluntary deregistration through the PRAVAAH portal by September 30, 2026. This initiative aims to streamline regulatory compliance and adapt to the changing financial environment.
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The new classification framework may simplify compliance for smaller NBFCs, potentially leading to reduced operational costs and increased competitiveness in the financial market.
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