The Reserve Bank of India (RBI) on Friday released a list of 16 upper layer non-banking finance companies (NBFC-ULs) that must comply with the increased regulation.
The 16 companies in the NBFC-UL list are: LIC Housing Finance, Bajaj Finance, Mahindra & Mahindra Financial Services, Shriram Transport, Tata Sons, L&T Finance, Indiabulls Housing Finance, Piramal Capital and Housing Finance, Cholamandalam Investment and Finance Company. Sanghvi Finance Pvt. Ltd., Muthoot Finance, PNB Housing Finance, Tata Capital Financial Services, Aditya Birla Finance, HDB Financial Services and Bajaj Housing Finance.
RBI’s scale-based NBFC regulation announced in October 2021 has four layers: base layer, middle layer, upper layer and top layer. The Upper Layer (UL) comprises NBFCs that guarantee advanced regulation based on a number of parameters and scoring. Earlier, RBI had classified NBFCs on the basis of type.
RBI said that despite appearing in the list of top 10 NBFCs in terms of asset size, HDFC Ltd was not included in the list due to the ongoing merger process with HDFC Bank.
RBI said these NBFCs will have to implement board-approved policies to adopt the enhanced regulatory framework applicable to all NBFCs at the upper level and prepare an implementation plan to comply with the new set of rules within three months. .
Further, the boards of these NBFCs should ensure that the conditions for NBFC-UL are complied with within 24 months, the regulator said.
As per RBI, the aggregate exposure value of an NBFC-UL to a counterparty should not exceed 20% and in case of a group of linked counterparties, it should not exceed 25%.
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