The Reserve Bank of India (RBI) published a list of 16 upper layer non-banking finance firms (NBFC-ULs) that must conform to stricter regulations on Friday.
The NBFC-UL list includes the following companies: LIC Housing Finance, Bajaj Finance, Mahindra & Mahindra Financial Services, Shriram Transport, Tata Sons, L&T Finance, Indiabulls Housing Finance, Piramal Capital & Housing Finance, Cholamandalam Investment and Finance Co., Shanghvi Finance Pvt. Ltd, Muthoot Finance, PNB Housing Finance, Tata Capital Financial Services, Aditya Birla Finance, HDB Financial
The RBI’s scale-based NBFC regulation, which was announced in October 2021, is divided into four layers: the base layer, the middle layer, the upper layer, and the top layer. The upper layer (UL) contains NBFCs that need increased regulation based on a variety of metrics and scoring. Previously, the RBI categorised NBFCs depending on their kind.
Despite being among the top ten NBFCs in terms of asset size, HDFC Ltd was excluded from the list owing to its pending merger with HDFC Bank, according to the RBI.
The RBI stated that these NBFCs must execute board-approved policies for the adoption of the increased regulatory framework applicable to all NBFCs in the upper tier, as well as develop an implementation strategy for conforming to the new set of regulations, within three months.
Furthermore, the boards of these NBFCs shall verify that the NBFC-UL conditions are met within 24 months, according to the regulator.
The aggregate exposure values of NBFC-UL to a single counterparty must not exceed 20 per cent and 25 per cent in the event of a group of related counterparties, according to the RBI.
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