RBI Retains ₹1 Lakh Crore Threshold for NBFC Upper Layer

The Reserve Bank of India retained the ₹1 lakh crore asset-size threshold for classifying Non-Banking Financial Companies into the Upper Layer, or NBFC-UL, under its scale-based regulation framework. The revised rules came into effect on 24 June 2026 and use asset size as the main criterion for identification of NBFC-UL entities.

NBFC Classification under Scale-Based Regulation

NBFCs are classified by the Reserve Bank of India into layers for regulatory purposes. The Upper Layer includes NBFCs selected annually by the central bank for enhanced regulatory requirements, and the latest framework replaces the earlier parametric scoring method with a simpler asset-size criterion. The ₹1 lakh crore threshold for NBFC-UL will now be reviewed every three years. The earlier proposal had suggested a five-year review cycle, but the final rule shortens the interval to respond to changes in growth, inflation, and risk profiles.

Ownership and Listing Rules for NBFC-UL

All bank-owned NBFCs will be subject to Upper Layer norms regardless of size, except for stock exchange listing requirements. Eligible government-owned NBFCs, including REC, Power Finance Corporation, and Housing and Urban Development Corporation, are also included in the NBFC-UL list and are exempt from listing requirements. The Reserve Bank of India has followed an ownership-neutral approach in the revised framework. The asset size for classification will be based on the latest audited standalone balance sheet prepared under applicable accounting standards.

Infrastructure Finance Companies and Exposure Limits

The Reserve Bank of India increased the large exposure limit for Infrastructure Finance Companies in the Upper Layer from 35% to 45% of Tier 1 capital. The revised limit applies from 24 June 2026 and is linked to project financing capacity in the infrastructure sector. Infrastructure Finance Companies are a category of NBFCs that provide long-term finance for infrastructure projects. Tier 1 capital is a core measure of a financial institution’s capital strength under prudential regulation.

Important Facts for Exams

• The Reserve Bank of India regulates NBFCs under a scale-based regulatory framework introduced in 2021.
• NBFCs are financial institutions that provide credit and other financial services but do not hold a full banking licence.
• REC, Power Finance Corporation, and Housing and Urban Development Corporation are government-owned financial institutions.
• Tier 1 capital is used in banking and NBFC regulation to measure core capital adequacy.

The Upper Layer of NBFCs is reviewed annually by the Reserve Bank of India. The latest framework came into force on 24 June 2026.