RBI’s Draft 2026 Directions on NBFC-UL: Unified Asset-Based Criteria and Government NBFC Inclusion

1. Overview of the Draft Amendment Directions

The Reserve Bank of India has released draft amendment directions in April 2026 that significantly recalibrate the framework for identifying Non-Banking Financial Companies in the Upper Layer (NBFC-UL) under the Scale Based Regulatory (SBR) framework.

Under the existing regime, NBFC-UL categorisation rests on a dual mechanism comprising:

  • Selection of the top ten eligible NBFCs by asset size, and
  • A parametric scoring model based on various risk and systemic importance indicators.

The draft proposes to discard this twin-track approach and shift to a single, absolute, and transparent yardstick anchored solely in asset size. The proposed threshold for NBFC-UL classification is ₹1,00,000 crore and above, determined from the most recent audited financial statements.

Concurrently, the Reserve Bank has proposed to bring Government owned NBFCs within the ambit of the Upper Layer, wherever they meet the revised eligibility criteria, thereby pursuing an ownership-neutral regulatory framework.

In a related move, NBFC-UL entities may be permitted to treat State Government guarantees as a credit risk transfer mechanism without any quantitative ceiling, subject to conditions, effectively enabling shifting of exposures to States with a 20 per cent risk weight for capital computation.

Stakeholders have been asked to send their comments on or before May 04, 2026 through the channels prescribed by the Reserve Bank.

2. Public Consultation Process and Submission Channels

The Reserve Bank has circulated two principal draft instruments for public feedback:

  • The draft ‘Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Second Amendment Directions, 2026’; and
  • The draft ‘Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Third Amendment Directions, 2026’.

2.1 Entities and persons invited to comment

Feedback has been solicited from:

  • NBFCs across all layers under the SBR framework,
  • Market participants and financial sector entities,
  • Industry bodies and professional associations, and
  • Members of the public and any other concerned stakeholders.

2.2 Mode and deadline for submission

  1. Last date for comments:

    • Feedback must reach the Reserve Bank by May 04, 2026.

  2. Submission methods:

    • Online through the ‘Connect 2 Regulate’ section hosted on the RBI’s official website; or

    • By physical correspondence addressed to:

      Chief General Manager – in – Charge
      Department of Regulation (SIG-NBFCs)
      Reserve Bank of India
      12th Floor, Central Office Building
      Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001

    • Alternatively, through email, clearly mentioning in the subject line:

      ‘Feedback on the draft Amendment Directions on review of methodology for identification of NBFC-UL and inclusion of Government NBFCs in NBFC-UL’.

Stakeholders are expected to provide reasoned comments, preferably referencing specific paragraphs or clauses of the draft directions in order to facilitate a focused review.

3. Background: Existing SBR Framework and Need for Change

The Scale Based Regulatory (SBR) Framework for NBFCs organises NBFCs into multiple layers based on their size, activity profile and perceived systemic significance. Presently, the Upper Layer (NBFC-UL) is identified through a two-pronged methodology:

  • Automatic selection of the top ten eligible NBFCs by asset size, and
  • Application of a parametric scoring methodology considering factors such as size, interconnectedness, complexity, and supervisory inputs.

This approach, while risk-sensitive, involves multiple parameters and supervisory judgement, and may not always be transparent to market participants. In addition, Government owned NBFCs were previously assigned either to the Base Layer or the Middle Layer, and were not eligible to be placed in the Upper Layer, even if their systemic footprint was comparable to large private sector entities.

The Reserve Bank now seeks to:

  • Simplify and standardise the Upper Layer identification framework,
  • Enhance predictability and transparency for NBFC classification, and
  • Align treatment of Government owned NBFCs with that of non-Government entities by adopting an ownership-neutral stance.