RBI Regulatory Framework
The Reserve Bank of India (RBI) serves as the primary regulator for NBFCs in India. The regulatory framework has evolved significantly over the years to ensure financial stability, consumer protection, and systemic risk management.
Registration Requirements
Minimum Capital Requirements
NBFCs must maintain minimum Net Owned Fund (NOF) based on their classification and business model.
Current Requirements:
- Investment & Credit Company: ₹2 crores
- Asset Finance Company: ₹2 crores
- Loan Company: ₹2 crores
- Infrastructure Finance Company: ₹300 crores
- Housing Finance Company: ₹50 crores
Capital Adequacy Ratio
NBFCs must maintain adequate capital to support their risk-weighted assets and ensure financial stability.
CRAR Requirements:
- Minimum CRAR: 15%
- Tier 1 Capital: At least 10%
- Common Equity Tier 1: At least 8%
- Regular monitoring and reporting
Asset Classification & Provisioning
NBFCs must follow prudential norms for asset classification and maintain adequate provisions for non-performing assets.
NPA Classifications:
- Standard Assets: Current accounts
- Sub-standard: Overdue 90+ days
- Doubtful: Overdue 12+ months
- Loss Assets: Uncollectible
Liquidity Management
NBFCs must maintain adequate liquidity buffers and comply with asset-liability management guidelines.
Liquidity Requirements:
- Liquidity Coverage Ratio (LCR)
- Asset-Liability mismatch limits
- Contingency funding plans
- Stress testing requirements
Governance and Risk Management
NBFCs are required to implement robust governance structures and risk management frameworks to ensure sound business practices.
| Governance Aspect | Requirement | Applicability |
|---|---|---|
| Board Composition | Minimum 50% independent directors | Upper Layer NBFCs |
| Risk Committee | Board-level risk committee | Upper Layer NBFCs |
| Audit Committee | Independent audit committee | All registered NBFCs |
| Chief Risk Officer | Dedicated CRO position | Upper Layer NBFCs |
| Internal Audit | Independent internal audit function | All registered NBFCs |
Scale-Based Regulation
RBI has implemented a scale-based regulatory framework that applies different levels of regulation based on the size and systemic importance of NBFCs.
Base Layer
NBFCs with assets between ₹1,000 crores to ₹5,000 crores
- Basic regulatory requirements
- Standard reporting norms
- Asset classification rules
- Fair practices code
Middle Layer
NBFCs with assets between ₹5,000 crores to ₹50,000 crores
- Enhanced supervision
- Additional governance requirements
- Liquidity risk management
- Concentration risk limits
Upper Layer
NBFCs with assets above ₹50,000 crores or identified as systemically important
- Bank-like regulations
- Advanced risk management
- Regular stress testing
- Enhanced disclosures
Compliance and Reporting
NBFCs must submit regular returns and reports to RBI to ensure ongoing compliance with regulatory requirements.
Key Reporting Requirements:
- Monthly returns on asset quality and capital adequacy
- Quarterly financial statements and prudential returns
- Annual financial statements and audit reports
- Liquidity monitoring reports
- Large exposure returns
- ALM returns for asset-liability management
Consumer Protection Measures
NBFCs are required to implement comprehensive customer protection measures including fair lending practices, transparent pricing, and effective grievance redressal mechanisms.
Recent Regulatory Developments
The NBFC regulatory landscape continues to evolve with new guidelines and amendments being introduced regularly to address emerging risks and market developments.
- Introduction of scale-based regulation framework
- Enhanced governance and risk management norms
- Liquidity risk management framework
- Revised asset classification and provisioning norms
- Digital lending guidelines
- Account aggregator framework