RBI Proposes Simpler Rs 1 Lakh Crore Asset Threshold for NBFC-Upper Layer Classification; Government NBFCs to Be Included
The Reserve Bank of India (RBI) has released draft amendment directions proposing a significant overhaul of the methodology used to identify Non-Banking Finance Companies in the Upper Layer (NBFC-UL) under its Scale Based Regulatory (SBR) Framework. The central bank has invited public comments and stakeholder feedback on the proposals until May 4, 2026, after which finalised directions will be issued.
What Is Changing: From Complex Scoring to a Simple Asset Threshold
Under the existing SBR Framework, NBFCs are classified into the Upper Layer through a two-pronged methodology — identifying the top ten eligible NBFCs by asset size and applying a parametric scoring model that factors in multiple financial and systemic risk parameters.
The RBI now proposes to replace this methodology entirely with a single, transparent, absolute criterion — asset size of Rs 1,00,000 crore (Rs 1 lakh crore) and above. The shift is aimed at making the classification simpler, more objective, and more transparent for all stakeholders.
Commenting on the proposal, A. M. Karthik, Senior Vice President and Co-Group Head of Financial Sector Ratings at ICRA, welcomed the move, noting that an asset-size-driven approach provides much-needed clarity. He also flagged that based on current industry positions, the number of NBFC-ULs is likely to increase beyond the 15 entities identified under the previous framework.
Government-Owned NBFCs to Be Brought Under Upper Layer
In a second significant proposal, the RBI has moved to end a long-standing anomaly in its regulatory framework. Currently, government-owned NBFCs are placed only in the Base Layer or Middle Layer — regardless of their size — and are explicitly excluded from the Upper Layer classification.
The draft directions now propose to bring eligible government-owned NBFCs into the NBFC-UL framework based on the revised asset-size criteria, in line with the principle of an ownership-neutral regulatory regime. This means large state-owned NBFCs meeting the Rs 1 lakh crore threshold could now face enhanced regulatory scrutiny equivalent to their private-sector counterparts.
State Government Guarantees as Credit Risk Transfer Tools
The RBI has also proposed allowing all NBFC-UL entities to use State Government guarantees as a credit risk transfer instrument without any upper limit, subject to specified conditions. This could provide greater operational flexibility to upper-layer NBFCs in managing their credit risk exposures.
The Tata Sons Angle
The proposed framework revision has significant implications for the Tata Sons situation. Previously classified among the 15 NBFC-ULs, Tata Sons had been required to pursue a public listing under the existing rules. To avoid this obligation, the company surrendered its NBFC licence — a move that drew considerable attention but on which the RBI had remained publicly silent.
The revised norms, once finalised, could provide greater clarity on where Tata Sons — and similar holding companies — stand within the regulatory framework. The issue is particularly sensitive given the ongoing ownership dispute between Shapoorji Pallonji Group, which holds over 18% in Tata Sons and has been pushing for its listing, and Tata Trusts, which holds 66% and remains opposed to a public listing of the Tata Group's holding company.
Implications for the NBFC Sector and Investors
The proposed shift to a clear, asset-size-based threshold for NBFC-UL classification is broadly seen as a positive regulatory development — removing ambiguity and making it easier for large NBFCs to understand and plan for their regulatory obligations. The inclusion of government-owned entities brings consistency and levels the regulatory playing field across ownership structures.
For investors tracking large NBFC stocks, the expansion of the NBFC-UL list beyond the previous 15 entities means that additional companies could face heightened capital, governance, and disclosure requirements — a factor worth monitoring as the final directions take shape after the May 4 public comment deadline.
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