RBI Overhauls NBFC Upper Layer Classification: ₹1 Lakh Crore Asset Threshold Now Sole Criterion

Overview of the Amendment

The Reserve Bank of India has introduced a significant regulatory update through the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Second Amendment Directions, 2026, which took effect on June 24, 2026. This amendment fundamentally restructures how Non-Banking Financial Companies are identified for placement in the Upper Layer (NBFC-UL) under the Scale Based Regulatory (SBR) Framework.

The core change is both straightforward and consequential: the earlier multi-parametric scoring methodology for identifying Upper Layer NBFCs has been replaced with a single, objective financial threshold — an asset size of ₹1,00,000 crore or above, as reflected in the latest audited balance sheet.

Important: These Amendment Directions come into force with immediate effect from the date of issuance, i.e., June 24, 2026, and apply to all eligible NBFCs across all layers of the Scale Based Regulatory Framework.

The parent framework governing this amendment is the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025, originally issued on November 28, 2025. That framework established a four-tiered Scale Based Regulation structure for NBFCs, categorising them into Base Layer, Middle Layer, Upper Layer, and Top Layer based on their size, activities, and systemic risk potential.

The Second Amendment Directions, 2026 have been issued under the authority vested in the Reserve Bank by:

  • Sections 45JA, 45K, 45L and 45M of the Reserve Bank of India Act, 1934 (Act 2 of 1934)
  • Section 3 read with Section 31A and Section 6 of the Factoring Regulation Act, 2011 (Act 12 of 2012)
  • Sections 30, 30A, 32 and 33 of the National Housing Bank Act, 1987 (Act 53 of 1987)

The amendment was necessitated by a review of the existing instructions relating to:

  1. The methodology for identifying NBFCs in the Upper Layer
  2. The placement of Government-owned NBFCs across various regulatory layers

Key Modifications Introduced by the Amendment

The amendment makes several targeted modifications to the existing Directions. Each change is designed to simplify regulatory compliance, remove subjectivity, and introduce greater transparency in classification.

1. Substitution of Paragraph 12

The original text of Paragraph 12 has been replaced with the following:

"The Upper Layer shall comprise of those NBFCs which are specifically identified annually by the Reserve Bank as warranting enhanced regulatory requirement based on the criteria provided in paragraph 24 of these Directions."

This revision ensures that the Upper Layer identification process remains a formal annual exercise by the Reserve Bank, now anchored to a clear, asset-based criterion rather than a discretionary parametric scoring model.

2. Deletion of Sub-Paragraph (4) of Paragraph 15

Sub-paragraph (4) under Paragraph 15 has been removed entirely. This deletion is part of the broader effort to eliminate provisions that were tied to the old parametric assessment mechanism, which is no longer applicable under the revised framework.

3. Revised Heading for Sub-Section A.8.1 of Chapter II

The heading of sub-section A.8.1 of Chapter II has been updated to:

"Criteria for identification of NBFCs in the Upper Layer"