Introduction
The Reserve Bank of India’s Scale Based Regulation (SBR) framework, effective from October 2022, represents a fundamental shift in how Non-Banking Financial Companies are regulated in India. This framework categorizes NBFCs into four layers based on their size, activity, and perceived riskiness.
The Four-Layer Structure
Base Layer (NBFC-BL)
- NBFCs with asset size below ₹1,000 crore
- Non-deposit taking NBFCs not in upper layer
- Minimum capital requirements and basic governance
Middle Layer (NBFC-ML)
- NBFCs with asset size of ₹1,000 crore and above
- Deposit-taking NBFCs regardless of asset size
- Enhanced regulatory requirements
Upper Layer (NBFC-UL)
- Top 10 NBFCs by asset size
- NBFCs identified by RBI based on parameters
- Bank-like regulatory framework
Top Layer (NBFC-TL)
- Reserved for NBFCs with extreme risk perception
- Currently intended to be empty
Compliance Implications
The SBR framework introduces graduated compliance requirements including enhanced capital buffers, stricter NPA norms, board composition requirements, and detailed disclosure obligations that increase with each layer.
Key Governance Requirements
- Independent director composition minimums
- Risk Management Committee mandatory for ML and above
- Internal audit requirements
- Large exposure framework compliance
- Corporate governance reporting
How We Help
At Deepa Sharma & Associates, we specialize in NBFC compliance across all layers of the SBR framework. Our services include regulatory classification assessment, compliance gap analysis, board process management, and ongoing RBI filing support.