The Reserve Bank of India (RBI) has proposed a significant overhaul of the framework used to classify upper-layer non-banking financial companies (NBFCs), shifting to a simpler asset-size based methodology.Under the draft amendments to the Scale-Based Regulatory (SBR) framework, NBFCs with an asset size of ₹1 lakh crore and above would be categorised as upper-layer entities. This marks a departure from the existing approach, which combines asset size with a parametric scoring model based on 70% quantitative and 30% qualitative factors.
The proposed changes effectively remove the parametric scoring framework, replacing it with a more transparent and absolute threshold linked to the latest audited balance sheet. The RBI said the asset-size threshold will be reviewed every five years, while identification of upper-layer NBFCs will continue to be undertaken periodically.
In another key shift, the central bank has proposed allowing government-owned NBFCs to be included in the upper layer. Currently, such entities are restricted to the base or middle layers, and the move aligns with the regulator’s objective of maintaining an ownership-neutral framework.The changes also mark a clear shift from the existing rules:- Current rule: Upper-layer NBFCs identified using a parametric scoring modelProposed: Replaced with a ₹1 lakh crore asset-size threshold- Current rule: Government-owned NBFCs excluded from upper layerProposed: Eligible government NBFCs may now be included- Current rule: Automatic inclusion of top NBFCsProposed: Automatic inclusion provision removedAdditionally, upper-layer NBFCs may be allowed to use state government guarantees as a credit risk transfer instrument without any limit, expanding their operational flexibility.Also Read: RBI proposes time lag, tighter checks to curb digital payment fraud; seeks feedback by May 8Overall, the draft signals a move towards a simpler, more transparent framework for identifying systemically important NBFCs while broadening the scope of entities covered under tighter regulatory oversight.
Commenting on the development, Dinesh Kumar Khara said the changes make the framework more intuitive. “RBI has now actually made the process much simpler. If you really look at it from a fundamental point of view, what is more important is the size of the entity, and that is reflected in the balance sheet size,” he said, adding that the removal of restrictions on public sector NBFCs signals a shift towards supervision based on scale and systemic impact./div>
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/section>/div>First Published: Apr 10, 2026 6:45 PM IST
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