India’s central bank proposes 1 trillion Indian rupees asset threshold for upper layer NBFCs

BENGALURU: India’s central bank on Friday proposed classifying non-banking lenders with assets of 1 trillion rupees ($10.78 billion) or more as upper layer non-banking financial companies (NBFCs), a category comprising the largest and most systemically important players in the sector.

The Reserve Bank of India issued draft rules on how to identify upper layer NBFCs, with an aim to make the process more transparent and simpler

Upper layer NBFCs are the biggest and most systemically important non-bank lenders, whose failure could pose risks to the broader financial system, and are therefore subject to stricter regulatory oversight

The RBI also proposed to consider eligible government-owned NBFCs for inclusion in the list of upper layer NBFCs, which could earlier only be classified as base or middle layer NBFCs.

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Earlier, upper layer NBFCs were identified based on the top 10 by size and a risk-based scoring method

The RBI proposed that the criteria for identification of upper layer NBFCs will be reviewed periodically, with the asset size threshold to be reviewed every five years

RBI has sought comments from the public and other stakeholders by May 4