Source: The Hindu
Context: The Reserve Bank of India released a list of 17 large (Upper Layer) non-banking finance companies for 2026-27, which included Tata Sons — subjecting them to enhanced regulatory norms for at least five years and mandatory listing within three years of identification. The RBI added that Tata Sons’ status “is without prejudice to the outcome of its application for de-registration, which is under examination.”
Scale-Based Regulation
Scale-Based Regulation (SBR) is a regulatory approach in which financial institutions are regulated according to their size, complexity, interconnectedness and risk profile, rather than applying identical rules to every institution.
Under the RBI’s Scale Based Regulation (SBR) framework, NBFCs are placed in four layers, with regulatory intensity rising by size, activity and perceived risk.
| Layer | Composition |
|---|---|
| Base Layer (NBFC-BL) | Smaller, non-deposit-taking NBFCs below the asset threshold |
| Middle Layer (NBFC-ML) | Deposit-taking NBFCs, HFCs, IFCs, IDFs, SPDs and larger non-deposit-taking NBFCs |
| Upper Layer (NBFC-UL) | NBFCs specifically identified annually by the RBI as warranting enhanced regulatory requirements |
| Top Layer (NBFC-TL) | Ordinarily empty; populated only if the RBI judges a substantial increase in systemic risk from specific UL NBFCs |
Consequences of UL classification
- Enhanced regulatory norms for a minimum of five years, even if the NBFC later falls below the parametric benchmarks.
- Mandatory listing within three years of identification.
- Additional requirements including a Common Equity Tier 1 ratio, large exposure norms, differential provisioning, an independent compliance function, and internal capital adequacy assessment.
