RBI Exempts Government-Controlled NBFC-ULs from Financial Statement Disclosure Obligations

Overview

The Reserve Bank of India has introduced a targeted regulatory amendment that carves out a specific exemption for Government-owned and Government-controlled Non-Banking Financial Companies operating in the Upper Layer (NBFC-UL) of the Scale Based Regulatory Framework. This change, formally titled the Reserve Bank of India (Non-Banking Financial Companies — Financial Statements: Presentation and Disclosures) Second Amendment Directions, 2026, took effect on June 24, 2026, and modifies the disclosure obligations that NBFC-ULs were previously required to adhere to under the parent Directions issued in 2025.

This amendment carries significant implications for the NBFC sector, particularly for those entities that are wholly owned and governed by the Central or State Government. Understanding the scope, rationale, and legal basis of this amendment is essential for compliance professionals, NBFC management teams, and financial regulators monitoring the evolving regulatory landscape.

Background: The 2025 Directions and the Scale Based Regulatory Framework

The Parent Directions

The Reserve Bank of India had originally issued the Reserve Bank of India (Non-Banking Financial Companies — Financial Statements: Presentation and Disclosures) Directions, 2025, dated November 28, 2025. These Directions were framed under the authority vested in the Reserve Bank through multiple legislative instruments, including:

  • The Reserve Bank of India Act, 1934
  • The Factoring Regulation Act, 2011
  • The National Housing Bank Act, 1987

These Directions established a comprehensive framework governing how NBFCs must present and disclose information in their financial statements. The objective was to bring greater transparency, uniformity, and comparability to NBFC financial reporting across different layers and categories of entities.

The Scale Based Regulatory Framework for NBFCs

The Scale Based Regulatory (SBR) Framework classifies NBFCs into four distinct layers — Base Layer, Middle Layer, Upper Layer, and Top Layer — based on their size, systemic importance, and risk profile. NBFC-ULs represent entities that carry a higher degree of systemic significance and are therefore subject to more stringent regulatory requirements, including enhanced disclosures relating to ownership structure and governance.

Paragraph 23 of the 2025 Directions specifically prescribes disclosure requirements for NBFC-ULs, which include detailed information regarding ownership and control structures. These disclosures were intended to ensure that entities with greater systemic footprint remain transparent to regulators, investors, and other stakeholders.

The 2026 Amendment: What Has Changed

The Amended Provision

Through the Second Amendment Directions, 2026, the RBI has inserted a proviso immediately after paragraph 23 of the 2025 Directions. The newly inserted proviso reads as follows:

"Provided that these provisions shall not be applicable to NBFC-UL which are fully owned and controlled by Government."