Summary of Scale Based Regulations
A brief highlights of the regulations along with charts summarising classification of NBFCs can be viewed here. Our Youtube elaborating on the subject can be viewed here.
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List of Regulatory Provisions
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NBFC-NSI | NBFC-SI | HFC | ||||
| Without customer interface and public funds | With customer interface or public funds | Asset size between 500-1000 crores | Asset size 1000 crores and above | Top 10 or identified as such | Not in Top 10 | Top 10 or identified as such | |
| Supervisory category | BL | BL | BL | ML | UL | ML | UL |
| NOF | No change, that is, Rs 2 crores | Rs 5 crores by March 31, 2025 Rs 10 crores by March 31, 2027 |
No change, that is, Rs 15 crores by March 31, 2022 Rs 20 crores by March 31, 2023 |
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| NPA Norms | >150 days overdue By March 31, 2024 >120 days overdue By March 31, 2025 > 90 days By March 31, 2026 |
No change, that is, > 89 days | |||||
| Appointment of Director | Appoint at least one of the directors having relevant experience of having worked in a bank/ NBFC | ||||||
| IPO funding ceiling, if extending such loans | Rs 1 crore per borrower [effective from 1st April, 2021] | ||||||
| Internal Capital Adequacy Assessment Process (ICAAP) | NA | NA | NA | Applicable | Applicable | Applicable | Applicable |
| Maintain Common Equity Tier 1 capital of at least 9 per cent of Risk Weighted Assets | NA | NA | NA | NA | Applicable | NA | Applicable |
| Leverage limits (in addition to CRAR) | NA | NA | NA | NA | To be prescribed | NA | To be prescribed |
| Differential standard asset provisioning | NA | NA | NA | NA | To be prescribed | NA | To be prescribed |
| Limits on Concentration of credit/investment | NA | NA | Merged single exposure limit of 25% for single borrower/ party and 40% for single group of borrowers/ parties | Merged single exposure limit of 25% for single borrower/ party and 40% for single group of borrowers/ parties | To be followed till Large Exposure Framework is put in place | Merged single exposure limit of 25% for single borrower/ party and 40% for single group of borrowers/ parties | To be followed till Large Exposure Framework is put in place |
| Sensitive Sector Exposure (SSE), that is, exposure to commercial real estate and capital markets | NA | NA | NA | Fix board-approved internal limits | Fix board-approved internal limits | Same as existing | |
| Regulatory Restrictions on 1. Loans to directors, senior officers, relatives of directors, entities where directors or their relatives have major shareholding 2. Need for ensuring appropriate permission while appraising real loan proposals |
NA | NA | NA | Applicable | Applicable | Applicable | Applicable |
| Large Exposure Framework | NA | NA | NA | NA | Applicable | NA | Applicable |
| Internal Exposure Limits to be set by the Board on certain specific sectors to which credit is extended | NA | NA | NA | NA | Applicable; details awaited | NA | Applicable; details awaited |
| Risk Management Committee, at board or executive level | To be constituted | To be constituted | To be constituted | To be constituted | To be constituted | To be constituted | To be constituted |
| Disclosures to include types of exposure, related party transactions, loans to Directors/ Senior Officers and customer complaints. | Applicable | Applicable | Applicable | Applicable | Applicable | Applicable | Applicable |
| Board approved policy on grant of loans to directors, senior officers and relatives of directors and to entities where directors or their relatives have major shareholding | Applicable | Applicable | Applicable | Applicable | Applicable | Applicable | Applicable |
| Except for directorship in a subsidiary, KMP shall not hold any office (including directorships) in any other NBFC-ML or NBFC-UL | NA | NA | NA | To ensure compliance by October 1, 2024 |
To ensure compliance by October 1, 2024 |
To ensure compliance by October 1, 2024 |
To ensure compliance by October 1, 2024 |
| Independent director shall not be on the Board of more than three NBFCs (NBFC-ML or NBFC-UL) at the same time | NA | NA | NA | To ensure compliance by October 1, 2024 |
To ensure compliance by October 1, 2024 |
To ensure compliance by October 1, 2024 |
To ensure compliance by October 1, 2024 |
| Additional Disclosures in annal financial statements | NA | NA | NA | Applicable with effect from March 31, 2023 | Applicable with effect from March 31, 2023 | Applicable with effect from March 31, 2023 | Applicable with effect from March 31, 2023 |
| Appointment of a Chief Compliance Officer (CCO) | NA | NA | NA | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 |
| Composition of the Board should ensure mix of educational qualifications and experience within the Board | NA | NA | NA | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 |
| Other Governance matters i) The Board shall delineate the role of various committees (Audit Committee, Nomination and Remuneration Committee, Risk Management Committee or any other Committee) and lay down a calendar of reviews. ii) Formulate a whistle blower mechanism for directors and employees to report genuine concerns. iii) Board shall ensure good corporate governance practices in the subsidiaries of the NBFC. |
NA | NA | NA | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 | To be ensured by October 1, 2022 |
| Adoption of Core Banking Solution | NA | NA | NA | Applicable if having more than 10 branches | Applicable if having more than 10 branches | Applicable if having more than 10 branches | Applicable if having more than 10 branches |
| Composition of the Board should ensure mix of educational qualification and experience within the Board | NA | NA | NA | NA | Applicable | NA | Applicable |
| Mandatory listing of equity within 3 years of identification | NA | NA | NA | NA | Applicable | NA | Applicable |
| Reporting removal of Independent Directors before tenure | NA | NA | NA | NA | Applicable | NA | Applicable |
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