Scale Based Regulation (SBR) - Introduction

Updated as on 05 May 2025.

Chapter 1

1. Short Title and Commencement

1.1 These Directions shall be called the Master Direction- Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023.

2. Regulatory Structure under Scale Based Regulation (SBR)

2.1 Regulatory structure for Non-Banking Financial Companies (NBFCs) shall comprise of four layers based on their size, activity and perceived riskiness. NBFCs in the lowest layer shall be known as NBFCs-Base Layer (NBFCs-BL). NBFCs in middle layer and upper layer shall be known as NBFCs-Middle Layer (NBFCs-ML) and NBFCs Upper Layer (NBFCs-UL), respectively. The Top Layer is ideally expected to be empty and will be known as NBFCs-Top Layer (NBFCs-TL). Details of NBFCs populating the various layers shall be as prescribed in paragraphs 2.2 to paragraphs 2.6 below:

2.2 Base Layer

The Base Layer shall comprise of (a) non-deposit taking NBFCs below the asset size of ₹1,000 crore and (b) NBFCs undertaking the following activities - (i) NBFC-Peer to Peer Lending Platform (NBFC-P2P), (ii) NBFC-Account Aggregator (NBFC-AA), (iii) Non Operative Financial Holding Company (NOFHC) and (iv) NBFC not availing public funds and not having any customer interface.

2.3 Middle Layer

The Middle Layer shall consist of (a) all deposit taking NBFCs (NBFCs-D), irrespective of asset size, (b) non-deposit taking NBFCs with asset size of ₹1,000 crore and above and (c) NBFCs undertaking the following activities (i) Standalone Primary Dealer (SPD), (ii) Infrastructure Debt Fund-Non-Banking Financial Company (IDF-NBFC), (iii) Core Investment Company (CIC), (iv) Housing Finance Company (HFC) and (v) Non-Banking Financial Company-Infrastructure Finance Company (NBFC-IFC).

2.4 Upper Layer

The Upper Layer shall comprise of those NBFCs which are specifically identified by the Reserve Bank as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology as provided in the Annex I to these Directions. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor.

2.5 Top Layer

The Top Layer will ideally remain empty. This layer can get populated if the Reserve Bank is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the Upper Layer. Such NBFCs shall move to the Top Layer from the Upper Layer.

2.6 Categorization of NBFCs carrying out specific activity

As the regulatory structure envisages scale based as well as activity-based regulation, the following prescriptions shall apply in respect of the NBFCs.

2.6.1 NBFC-P2P, NBFC-AA, NOFHC and NBFC not availing public funds and not having any customer interface will always remain in the Base Layer of the regulatory structure.

2.6.2 NBFC-D, CIC, NBFC-IFC and HFC will be included in Middle Layer or the Upper Layer (and not in the Base layer), as the case may be. SPD and IDF-NBFC will always remain in the Middle Layer.

2.6.3 The remaining NBFCs, viz., NBFC-Investment and Credit Companies (NBFC ICCs), NBFC-Micro Finance Institutions (NBFC-MFIs), NBFC-Factors and Mortgage Guarantee Companies (MGCs) could lie in any of the layers of the regulatory structure depending on the parameters of the scale based regulatory framework.

2.6.4 Government owned NBFCs shall be placed in the Base Layer or Middle Layer, as the case may be. They will not be placed in the Upper Layer till further notice.

2.7 References to NBFC-ND, NBFC-ND-SI and NBFC-D

From October 01, 2022, all references to NBFC-ND (i.e., non-systemically important non deposit taking NBFC) shall mean NBFC-BL and all references to NBFC-D (i.e., deposit taking NBFC) and NBFC-ND-SI (systemically important non-deposit taking NBFC) shall mean NBFC-ML or NBFC-UL, as the case may be.

2.8 Multiple NBFCs in a Group - Classification in Middle Layer

2.8.1 NBFCs that are part of a common Group or are floated by a common set of promoters shall not be viewed on a standalone basis. The total assets of all the NBFCs4 in a Group shall be consolidated to determine the threshold for their classification in the Middle Layer.

2.8.2 If the consolidated asset (consolidation as per paragraph 2.8.1 above) size of the NBFCs in the Group is ₹1000 crore and above, then each NBFC-ICC, NBFC-MFI, NBFC Factor and MGC lying in the Group shall be classified as an NBFC in the Middle Layer and consequently, regulations as applicable to the Middle Layer shall be applicable to them. However, NBFC-D, within the Group, if any, shall also be governed under the Non Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Direction, 2016. Illustrative examples are provided in paragraph 136 of the Directions.

2.8.3 Statutory Auditors are required to certify the asset size (as on March 31) of all the NBFCs in the Group every year. The certificate shall be furnished to the Department of Supervision of the Reserve Bank under whose jurisdiction the NBFCs are registered.

2.8.4 Provisions contained in paragraph 2.8 shall not be applicable for classifying an NBFC in the Upper Layer.

2.9 Criteria for deciding NBFC-ML status

2.9.1 Once an NBFC reaches an asset size of ₹1,000 crore or above, it shall be subject to the regulatory requirements as per Section III of these Directions, despite not having such assets as on the date of last balance sheet. All such non-deposit taking NBFCs shall comply with the regulations/directions issued to NBFCs-ML from time to time, as and when they attain an asset size of ₹1,000 crore, irrespective of the date on which such size is attained.

2.9.2 In a dynamic environment, the asset size of a NBFCs can fall below ₹1,000 crore in a given month, which may be due to temporary fluctuations and not due to actual downsizing. In such a case the NBFC shall continue to meet the reporting requirements and shall comply with the extant directions as applicable to NBFC-ML, till the submission of its next audited balance sheet to the Reserve Bank and a specific dispensation from the Reserve Bank in this regard.

3. Applicability as per categories of NBFCs

3.1 The provisions of these Directions shall apply to the following:

3.1.1 Every NBFC-D registered with the Reserve Bank under the provisions of the RBI Act, 1934;

3.1.2 Every NBFC-ICC registered with the Reserve Bank under the provisions of the RBI Act, 1934;

3.1.3 Every NBFC-Factor registered with the Reserve Bank under section 3 of the Factoring Regulation Act, 2011 and every NBFC-ICC registered with the Reserve Bank under section 3 of the Factoring Regulation Act, 2011;

3.1.4 Every NBFC-MFI registered with the Reserve Bank under the provisions of the RBI Act, 1934;

3.1.5 Every NBFC-IFC registered with the Reserve Bank under the provisions of the RBI Act, 1934;

3.1.6 Every IDF-NBFC registered with the Reserve Bank under the provisions of the RBI Act, 1934.

3.2 These Directions shall apply to an NBFC being a Government company as defined under clause (45) of section 2 of the Companies Act, 2013 (Act 18 of 2013).

3.3 Specific directions applicable to specific categories of NBFCs registered as NBFC-Factor and NBFC-ICC registered under Factoring Regulation Act, 2011, IDF NBFC and NBFC-MFI are as provided under respective Sections in these Directions. Instructions contained for specific categories of NBFCs in respective Sections are in addition and not in substitution to the relevant instructions contained in these Directions.

3.4 The Directions under Chapter IV, Chapter V, paragraphs 4.1.1, 45, 66 and 67 shall not apply to NBFCs not availing public funds and not having any customer interface.

3.5 NBFCs availing public funds but not having any customer interface are exempt from the applicability of paragraphs 4.1.1, 45, 66 and 67 of the Directions.

3.6 NBFCs-BL having customer interface but not availing public funds are exempt from the applicability of Chapter IV and Chapter V of the Directions.

4. Applicability of other Directions issued by Department of Regulation

4.1 NBFCs shall ensure compliance with the applicable instructions, as prescribed in the following Directions:

4.1.1 Master Direction - Know Your Customer (KYC) Direction, 2016, as amended from time to time.

4.1.2 Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021, as amended from time to time. 4.1.3 Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021, as amended from time to time.

4.1.4 Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022, as amended from time to time.

4.1.5 Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022, as amended from time to time.

4.1.6 NBFCs may make use of the ‘Guidance Note on Operational Risk Management and Operational Resilience’ dated April 30, 2024, as amended from time to time.

4.1.7 Master Direction – Reserve Bank of India (Credit Information Reporting) Directions, 2025, as amended from time to time.

4.1A NBFCs-ML and above shall ensure compliance with the applicable instructions, as prescribed in the following Directions:

4.1A.1 Master Direction on Treatment of Wilful Defaulters and Large Defaulters, as amended from time to time.

4.2 These Directions consolidate the regulations as issued by Department of Regulation of the Reserve Bank. Any other directions/guidelines issued by any other Department of the Reserve Bank, as applicable to an NBFC shall be adhered to.

4.3 The categories of NBFCs, mentioned below, shall be subject to extant regulations governing them, as under:

4.3.1 NBFC-P2P - Master Directions - Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017, as amended from time to time.

4.3.2 NBFC-AA - Master Direction- Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016, as amended from time to time.

4.3.3 CIC - Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016, as amended from time to time. 4.3.4 SPD - Master Direction - Standalone Primary Dealers (Reserve Bank) Directions, 2016, as amended from time to time. 4.3.5 MGC - Master Directions - Mortgage Guarantee Companies (Reserve Bank) Directions, 2016, as amended from time to time.

4.3.6 HFC - Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021, as amended from time to time.