RBI Amendments Report – 24th Jun 2026 | ‘review of methodology for identification of NBFC-UL and inclusion of Government owned NBFCs in NBFC-UL’ and ‘Credit/Investment Concentration Norms – Government owned NBFCs’

1. Registration, Exemptions and Framework for Scale Based Regulation (SBR)

Applicable Entities

All NBFCs (Base, Middle, and Upper Layer), with a specific focus on Government-owned NBFCs.

Specific Changes Required

• Simplified NBFC-UL Identification: The existing complex scoring methodology is replaced by a flat, absolute criteria. Any NBFC with an asset size of ₹1,00,000 crore and above will automatically fall into the Upper Layer (NBFC-UL).
• Inclusion of Govt. NBFCs: Eligible Government-owned NBFCs are now explicitly brought into the NBFC-UL classification if they meet the ₹1 Lakh Crore asset threshold.
• State Guarantees: All NBFC-ULs are now permitted to use State Government guarantees as credit risk transfer instruments without any cap/limit, subject to specified conditions.

Management Action Plan

• Asset Projection Audit: Immediate assessment of current and projected asset sizes. Entities nearing the ₹1,00,000 crore mark must initiate NBFC-UL transition readiness.
• Regulatory Gap Analysis: Govt. NBFCs crossing the threshold must perform a gap analysis against NBFC-UL regulatory capital, governance, and compliance standards.
• Policy Revision: Update Credit Risk Policies to incorporate the unrestricted use of eligible State Government guarantees for risk mitigation.

💡 Real-World Example

A State-owned Infrastructure Finance Corporation with an asset base of ₹1.15 Lakh Crore previously operated under Middle Layer regulations. Under the new amendment, they automatically qualify as an NBFC-UL. The management must immediately establish an Internal Capital Adequacy Assessment Process (ICAAP) and appoint a dedicated Chief Compliance Officer (CCO), which was not previously mandated for them.

2. Concentration Risk Management

Applicable Entities

Government-owned NBFCs and existing NBFC-ULs.

Specific Changes Required

• Withdrawal of Exemptions: The RBI has permanently withdrawn the facility for Government-owned NBFCs to seek case-by-case exemptions from standard credit/investment concentration limits.
• Strict Adherence to Caps: Govt. NBFCs must now strictly adhere to standard exposure limits (e.g., 15% of Tier-I capital for a single borrower, 25% for a group).

Management Action Plan

• Portfolio Stress Testing: Conduct an immediate audit of top 20 borrower and investment exposures to identify breaches of concentration norms.
• Exposure Restructuring: Formulate a time-bound strategy to syndicate, securitize, or run-down exposures that currently exceed standard regulatory limits.
• Leverage State Guarantees: Utilize the new provision allowing unlimited use of State Guarantees as a risk transfer tool to offset exposure limits and free up capital.

💡 Real-World Example

A Central Government-owned Power Finance NBFC currently has an exposure equivalent to 35% of its capital base to a single State Power Utility, historically permitted via a special RBI exemption. With exemptions withdrawn, the NBFC must either down-sell 10% of this loan to a consortium of banks or procure an explicit, eligible State Government guarantee for the excess amount to achieve regulatory compliance.

3. Governance Framework

Applicable Entities

All NBFCs transitioning to the Upper Layer, particularly newly classified Government-owned NBFCs.

Specific Changes Required

• Board Level Standardization: Government NBFCs entering the Upper Layer must align their governance structures with private peers.
• Mandatory Committees & Key Personnel: Mandatory establishment of independent Risk Management, IT Strategy, and Nomination committees. Mandatory appointment of an independent Chief Risk Officer (CRO).

Management Action Plan

• Board Restructuring: Review Board composition to ensure adequate representation of Independent Directors as per SBR guidelines.
• Committee Charters: Draft and approve formal charters for newly mandated Board-level committees.
• Talent Acquisition: Initiate search for a highly qualified, independent CRO with a direct reporting line to the Board’s Risk Management Committee.

💡 Real-World Example

A State-owned NBFC historically had its MD & CEO acting as the ultimate authority on risk. Upon hitting the ₹1 Lakh Crore threshold and entering the Upper Layer, the board must now hire an external Chief Risk Officer on a fixed 3-year tenure. The CRO cannot be removed without Board approval, fundamentally shifting the balance of power and increasing risk oversight independence.

4. Financial Statements: Presentation and Disclosures

Applicable Entities

All NBFCs transitioning to Upper Layer and entities utilizing the new State Guarantee mechanisms.

Specific Changes Required

• Enhanced Granularity: Required to furnish detailed disclosures mapping exact exposure concentrations, previously hidden or aggregated.
• Transparency on Risk Transfers: Specific disclosure formats mandated for demonstrating the volume and nature of State Government guarantees utilized for credit risk transfer and their impact on capital adequacy calculations.

Management Action Plan

• IT & Core Banking Upgrade: Ensure accounting and core banking systems can tag, track, and extract data specifically for exposures backed by State Guarantees versus unsecured exposures.
• Format Redesign: The CFO’s office must redesign the Notes to Accounts template for the upcoming financial year to accommodate new regulatory line items.
• Auditor Coordination: Engage statutory auditors early to ensure alignment on the interpretation of new disclosure formats regarding risk transfers.

💡 Real-World Example

During the preparation of Q2 FY2027 financials, an NBFC-UL must now publish a specific sub-schedule in its financials showing: “Total Exposure to State Entities: ₹50,000 Cr | Portion Mitigated via Explicit State Guarantees: ₹20,000 Cr | Net Unmitigated Exposure: ₹30,000 Cr.” This level of public reporting was not previously required, giving investors clear visibility into the quality of the NBFC’s sovereign-backed assets.