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Tax Insights
27 October 2023
RBI issues Master Direction (Non-Banking Company – Scale Based Regulation)
Directions, 2023
In brief
The Reserve Bank of India (RBI) issued the much-awaited Master Direction – Reserve Bank of India (Non-
Banking Financial Company – Scale Based Regulation) Directions, 2023 (MD) on 19 October 2023. The MD has
been issued in supersession of the existing Master Directions Systemically Important and Non-Systemically
Important NBFCs.
RBI has followed a streamlined approach by consolidating the provisions of the Master Directions applicable to
Systemically and Non-Systemically important NBFCs, certain provisions of the Scale Based Regulatory
Framework for NBFCs and the related circulars released by the RBI periodically, into one single Master Direction.
All the NBFCs, except the expressly exempt ones, shall be governed by this MD.
RBI has established a layered approach with incremental obligations being assigned to each layer, as the NBFC
progresses based on its asset size, scale of activity and perceived riskiness. For ease of reference, the MD is
divided into sections applicable for different categories of NBFCs, viz. NBFC-Base Layer, NBFC-Middle Layer,
NBFC-Upper Layer, etc. depending upon size and function.
The MD has come into force with immediate effect (i.e., 19 October 2023).
In detail
Given below is a brief overview of the key changes made in the MD v is-a-vis the previous Master Directions and
other Circulars:
Overview of the Key Changes*
Sections from the previous MD that have
undergone change
Changes in the New MD
Abc
Sections deleted
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Master Direction - RBI (Non-Banking
Financial Company – Scale Based
Regulation) Directions, 2023
1.
Multiple
NBFCs in a
Group -
Classification
in Middle Layer
Para 3 of the Circular on Multiple NBFCs in a
Group: Classification in Middle Layer
If the consolidated asset (consolidation as per
para 2 above) size of the Group is ₹1000
crore and above, then each Investment and
Credit Company (NBFC-ICC), Micro Finance
Institution (NBFC-MFI), NBFC-Factor and
Mortgage Guarantee Company (NBFC-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.
Section I – Introduction
Para 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.
2.
Criteria for
deciding
NBFC-ML
status
Criteria for deciding NBFC-ND-SI status
(1) Once an NBFC reaches an asset size of
₹500 crore or above, it shall be subject to the
regulatory requirements as per Non-Banking
Financial Company - Systemically Important
Non-Deposit taking Company and Deposit
taking Company (Reserve Bank) Directions,
2016, 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 NBFC-ND-SI
from time to time, as and when they attain an
asset size of ₹500 crore, irrespective of the
date on which such size is attained.
In a dynamic environment, the asset size of a
company can fall below ₹ 500 crore in a given
month, which may be due to temporary
fluctuations and not due to actual downsizing.
In such a case the company shall continue to
meet the reporting requirements and shall
comply with the extant directions as
applicable to NBFC-NDSI, till the submission
of its next audited balance sheet to the Bank
and a specific dispensation from the Bank in
this regard.
Section I - Introduction
Para 2.9.1: Criteria for deciding NBFC-ML
status - 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.
Para 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.
1
Master Direction - Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank)
Directions, 2016 (Updated as on August 29, 2023)
Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2016 (Updated as on August 29, 2023)
Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs and related circulars (Note: certain provisions of the SBR
framework and its circular are not consolidated and continue to apply as directed by RBI)
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Master Direction - RBI (Non-Banking
Financial Company – Scale Based
Regulation) Directions, 2023
3.
Applicability as
per categories
of NBFCs
-
Section I – Introduction: Para 3
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, IDFNBFC
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
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Regulation) Directions, 2023
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 the
Department of
Regulations
-
Section I – Introduction Para 4
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.
4.2 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:
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Master Direction - RBI (Non-Banking
Financial Company – Scale Based
Regulation) Directions, 2023
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.
5.
Definition of
NBFC-IFC
“NBFC-IFC” means a non-deposit taking
NBFC that fulfills the following criteria:
(a) a minimum of 75 per cent of its total
assets deployed in “infrastructure loans”;
(b) Net owned funds of ₹300 crore or above;
(c) minimum credit rating of 'A' issued by any
of the SEBI-registered Credit Rating
Agencies;
(d) CRAR of 15 percent (with a minimum Tier
I capital of 10 percent).
Section I – Introduction
Para 5.1.20: “NBFC-IFC” means a non-
deposit taking NBFC which has a minimum of
75 percent of its total assets deployed
towards infrastructure lending.
6.
Definition of
NBFC-MFI
“NBFC-MFI” means a non-deposit taking
NBFC that fulfils the following conditions: (a)
Minimum Net Owned Funds of ₹5 crore. (For
NBFC-MFIs registered in the North-Eastern
Region of the country, the minimum NOF
requirement shall stand at ₹2 crore). (b) Not
less than 75% of its total assets are in the
nature of “microfinance loans” as defined
Section I – Introduction
Para 5.1.21: “NBFC-MFI” means a non-
deposit taking NBFC which has a minimum of
75 percent of its total assets deployed
towards “microfinance loans” as defined
under Reserve Bank of India (Regulatory
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Financial Company – Scale Based
Regulation) Directions, 2023
under Reserve Bank of India (Regulatory
Framework for Microfinance Loans)
Directions, 2022.
Framework for Microfinance Loans)
Directions, 2022.
7.
Definition of
Tier-I Capital
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
“Tier I Capital” means owned fund as reduced
by investment in shares of other non-banking
financial companies and in shares,
debentures, bonds, outstanding loans and
advances including hire purchase and lease
finance made to and deposits with
subsidiaries and companies in the same
group exceeding, in aggregate, ten per cent
of the owned fund;
Provision applicable to NBFC-ND-SI asset
size above 500 crore
“Tier I Capital” means owned fund as reduced
by investment in shares of other non-banking
financial companies and in shares,
debentures, bonds, outstanding loans and
advances including hire purchase and lease
finance made to and deposits with
subsidiaries and companies in the same
group exceeding, in aggregate, ten per cent
of the owned fund; and perpetual debt
instruments issued by a non-deposit taking
non-banking financial company in each year
to the extent it does not exceed 15 per cent of
the aggregate Tier I Capital of such company
as on March 31 of the previous accounting
year.
Section I – Introduction
Para 5.1.34: “Tier 1 capital” for NBFCs
(except NBFCs-BL) is the sum of
(i) Owned fund as reduced by investment in
shares of other NBFCs and in shares,
debentures, bonds, outstanding loans and
advances including hire purchase and lease
finance made to and deposits with
subsidiaries and companies in the same
group exceeding, in aggregate, ten percent of
the owned fund; and
(ii) Perpetual debt instruments issued by a
non-deposit taking NBFCs in each year to the
extent it does not exceed 15 percent of the
aggregate Tier 1 capital of such company as
on March 31 of the previous accounting year.
Note – NBFCs-BL are not eligible to include
perpetual debt instruments in their Tier 1
capital.
8.
Definition of
Tier-II Capital
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
“Tier II capital” includes the following:
i. preference shares other than those which
are compulsorily convertible into equity;
ii. revaluation reserves at discounted rate of
fifty five percent;
iii. General provisions (including that for
Standard Assets) and loss reserves to the
extent these are not attributable to actual
Section I – Introduction
Para 5.1.35:“Tier 2 capital” for NBFCs
(except NBFCs-BL) is the sum of
i. Preference shares other than those which
are compulsorily convertible into equity;
ii. Revaluation reserves at discounted rate of
55 percent;
iii. General provisions (including that for
Standard Assets) and loss reserves to the
extent these are not attributable to actual
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Financial Company – Scale Based
Regulation) Directions, 2023
diminution in value or identifiable potential
loss in any specific asset and are available
to meet unexpected losses, to the extent
of one and one fourth percent of risk
weighted assets;
iv. hybrid debt capital instruments;
v. subordinated debt;
and to the extent the aggregate does not
exceed Tier I capital.
Provision applicable to NBFC-ND-SI asset
size above 500 crore
“Tier II capital” includes the following:
(a) preference shares other than those which
are compulsorily convertible into equity;
(b) revaluation reserves at discounted rate of
fifty five per cent;
(c) General provisions (including that for
Standard Assets) and loss reserves to the
extent these are not attributable to actual
diminution in value or identifiable potential
loss in any specific asset and are available to
meet unexpected losses, to the extent of one
and one fourth percent of risk weighted
assets;
(d) hybrid debt capital instruments;
(e) subordinated debt; and
(f) perpetual debt instruments issued by a
non-deposit taking non-banking financial
company which is in excess of what qualifies
for Tier I Capital, to the extent the aggregate
does not exceed Tier I capital.
diminution in value or identifiable potential
loss in any specific asset and are available
to meet unexpected losses, to the extent
of one and one fourth percent of risk
weighted assets;
iv. Hybrid debt capital instruments;
v. Subordinated debt; and
vi. Perpetual debt instruments issued by a
non-deposit taking NBFC which is in
excess of what qualifies for Tier 1 capital;
to the extent the aggregate does not exceed
Tier 1 capital.
Note – NBFCs-BL are not eligible to include
perpetual debt instruments in their Tier 2
capital.
9.
Net Owned
Fund
Requirements
Para 3.1 (a) of SBR Framework
Regulatory minimum Net Owned Fund (NOF)
for NBFC-ICC, NBFC-MFI and NBFC-Factors
shall be increased to ₹10 crore. The following
glide path is provided for the existing NBFCs
to achieve the NOF of ₹10 crore:
Section II – Regulations applicable for
NBFCs – BL
Para 6: Net Owned Fund Requirement
6.1 In exercise of the powers conferred under
clause (b) of sub-section (1) of section 45IA
of the RBI Act,1934 and all the powers
enabling it in that behalf, the Reserve Bank,
hereby specifies ₹10 crore as the Net Owned
Fund (NOF) required for an NBFC-ICC,
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Master Direction - RBI (Non-Banking
Financial Company – Scale Based
Regulation) Directions, 2023
NBFCs
Current
NOF
By
March
31, 2025
By
March
31, 2027
NBFC-
ICC
₹2 crore
₹5 crore
₹10
crore
NBFC-
MFI
₹5 crore
(₹2 crore
in NE
Region)
₹7 crore
(₹5 crore
in NE
Region)
₹10
crore
NBFC-
Factors
₹5 crore
₹7 crore
₹10
crore
However, for NBFC-P2P, NBFC-AA, and
NBFCs with no public funds and no customer
interface, the NOF shall continue to be ₹2
crore. It is clarified that there is no change in
the existing regulatory minimum NOF for
NBFCs - IDF, IFC, MGCs, HFC, and SPD.
NBFC-MFI and NBFC-Factor to commence
or carry on the business of non-banking
financial institution. For NBFC-P2P, NBFC-
AA, and NBFC not availing public funds and
not having any customer interface, the NOF
shall be ₹2 crore. For NBFC-IFC and IDF-
NBFC, the NOF shall be ₹300 crore.
6.2 The following glide path is provided for
the existing NBFCs, viz., NBFC-ICC, NBFC-
MFI and NBFC-Factor to achieve the NOF of
₹10 crore:
NBFCs
Current
NOF
By March
31, 2025
By
March
31, 2027
NBFC-
ICC
₹2 crore
₹5 crore
₹10
crore
NBFC-
MFI
₹5 crore
(₹2 crore
in NE
Region)
₹7 crore
(₹5 crore
in NE
Region)
₹10
crore
NBFC-
Factors
₹5 crore
₹7 crore
₹10
crore
6.3 NBFCs failing to achieve the prescribed
level within the stipulated period shall not be
eligible to hold the Certificate of Registration
(CoR) as NBFCs.
10.
Investment
through
Alternative
Investment
Funds -
Calculation of
NOF of an
NBFC
While arriving at the NOF figure, investment
made by an applicable NBFC in entities of the
same group concerns shall be treated alike,
whether the investment is made directly or
through an Alternative Investment Fund (AIF)/
Venture Capital Fund (VCF), and when the
funds in the VCF have come from the
applicable NBFC to the extent of 50per cent
or more; or where the beneficial owner, in the
case of Trusts is the applicable NBFC, if 50
per cent of the funds in the Trusts are from
the concerned applicable NBFC. For this
purpose, "beneficial ownership" shall mean
holding the power to make or influence
decisions in the Trust and being the recipient
of benefits arising out of the activities of the
Section II – Regulations applicable for
NBFCs – BL
Para 7: In terms of section 45IA of the RBI
Act, 1934, the investments/loans/exposures
to the subsidiaries, companies in the same
group and other NBFCs, in excess of 10 per
cent of aggregate of the paid-up equity capital
and free reserves are deducted to arrive at
NOF. In the context of arriving at the NOF
figure, investment made by the NBFC in
entities of the same group, either directly or
indirectly, through an Alternative Investment
Fund (AIF), shall be treated alike, provided
the funds in the AIF (in company form) have
come from NBFC to the extent of 50 per cent
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Regulation) Directions, 2023
Trust. In arriving at the NOF, the substance
would take precedence over form.
or more; or where the beneficial owner in the
case of AIF (in trust form) is the NBFC and 50
per cent of the funds in the trust have come
from the NBFC. For this purpose, "beneficial
ownership" shall mean holding the power to
make or influence decisions in the trust and
being the recipient of benefits arising out of
the activities of the trust. In arriving at the
NOF, the substance would take precedence
over form.
11.
Leverage ratio
and Tier 1
Capital
Applicable only to the NBFC-ND-NSI
(asset size below 500 crore):
The leverage ratio of an applicable NBFC
(except NBFC-MFIs and NBFC-IFCs) shall
not be more than 7 at any point of time, with
effect from March 31, 2015.
In respect of NBFCs primarily engaged in
lending against gold jewellery (such loans
comprising 50 percent of more of their
financial assets) they shall maintain a
minimum Tier I capital of 12 per cent.
Section II – Regulations applicable for
NBFCs – BL asset size upto 1000 crore
Para 9.1
Leverage Ratio- The leverage ratio of
NBFCs (except NBFC-MFIs, NBFCs-ML and
above) shall not be more than seven at any
point of time.
Note: Leverage ratio means the total Outside
Liabilities divided by Owned Fund.
Para 9.2
Tier I capital - NBFCs primarily engaged in
lending against gold jewellery (such loans
comprising 50 percent of more of their
financial assets) shall maintain a minimum
Tier 1 capital of 12 percent of aggregate risk
weighted assets of on-balance sheet and of
risk adjusted value of off-balance sheet items.
The treatment to on-balance and off-balance
sheet assets for capital adequacy shall be as
provided in paragraphs 84 and 85 of these
Directions respectively. These NBFCs shall
also adhere to provisions in paragraph 86 of
the Directions on treatment of deferred tax
assets and deferred tax liabilities for
computation of capital
12.
Income
Recognition
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
In cases of loans where moratorium has been
granted for repayment of interest, the interest
income may be recognised on accrual basis
for accounts which continue to be classified
as ‘standard’.
Section II – Regulations applicable for
NBFCs – BL (asset size upto 1000 crore)
Para 12.3 -
In cases of loans where moratorium has been
granted for repayment of interest, the interest
income may be recognised on accrual basis
for accounts which continue to be classified
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Regulation) Directions, 2023
Provision applicable to NBFC-ND-SI asset
size above 500 crore
In cases of loans where moratorium has been
granted for repayment of interest, the interest
income may be recognised on accrual basis
for accounts which continue to be classified
as ‘standard’. This shall be evaluated against
the definition of ‘restructuring’ provided in
paragraph 1 of the Annex-1 to the circular
regarding ‘Prudential Framework for
Resolution of Stressed Assets’ dated June 7,
2019.
as ‘standard’. For NBFCs-ML and NBFCs-UL,
this shall be evaluated against the definition
of ‘restructuring’ provided in paragraph 1 of
the Annex-1 to the circular on ‘Prudential
Framework for Resolution of Stressed Assets’
dated June 7, 2019.
13.
Asset
Classification
The asset classification norms as given below
shall apply to every applicable NBFC (except
NBFC-MFIs).
Section II – Regulations applicable for
NBFCs – BL
Para 14
The asset classification norms as given below
shall apply to ‘applicable’ NBFCs (i.e. except
NBFCs-ML and above and microfinance
loans of NBFC-MFIs).
14.
Sub-standard
asset
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
Sub-standard Asset- (a) an asset which has
been classified as non-performing asset for a
period not exceeding 18 months;………..
Provision applicable to NBFC-ND-SI asset
size above 500 crore
Sub-standrad Asset - (a) an asset which has
been classified as non-performing asset for a
period not exceeding 12 months……….
Section II – Regulations applicable for
NBFCs – BL (asset size upto 1000 crore)
Para 14.1.2. -
“Sub-standard asset” shall mean
(i) an asset which has been classified as non-
performing asset for a period not exceeding
18 months;…………
Section III – Regulations applicable for
NBFCs – ML (asset size 1000 crore and
above)
Para 87-
“Sub-standard asset” shall mean- (i) an asset
which has been classified as non-performing
asset for a period not exceeding 12
months;……………
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15.
Doubtful asset
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
Doubtful asset - shall mean: a. a term loan, or
b. a lease asset, or c. a hire purchase asset,
or d. any other asset, which remains a sub-
standard asset for a period exceeding 18
months;
Provision applicable to NBFC-ND-SI asset
size above 500 crore
Doubtful asset shall mean -(a) a term loan, or
(b) a lease asset, or (c) a hire purchase
asset, or (d) any other asset, which remains a
sub-standard asset for a period exceeding 12
months.
Section II – Regulations applicable for
NBFCs – BL (asset size upto 1000 crore)
Para 14.1.3-
“Doubtful asset” shall mean
(i) a term loan, or
(ii) a lease asset, or
(iii) a hire purchase asset, or
(iv) any other asset,
which remains a sub-standard asset for a
period exceeding 18 months.
Section III – Regulations applicable for
NBFCs – ML (asset size 1000 crore and
above)
Para 87-
“Doubtful asset” shall mean:
(i) a term loan, or
(ii) a lease asset, or
(iii) a hire purchase asset, or
(iv) any other asset,
which remains a sub-standard asset for a
period exceeding 12 months
16.
Non-
Performing
Asset
(v) Non-Performing Asset (referred to in these
Directions as “NPA”) shall mean: (NBFC-ND-
NSI asset size below 500 crore)
a) an asset, in respect of which, interest has
remained overdue for a period of six months
or more;
b) a term loan inclusive of unpaid interest,
when the instalment is overdue for a period of
six months or more or on which interest
amount remained overdue for a period of six
months or more;
Section II – Regulations applicable for
NBFCs – BL asset size upto 1000 crore
Para 14.3
“Non-Performing Asset” (NPA) for applicable
NBFCs shall mean:
(i) an asset, in respect of which, interest has
remained overdue for a period of more than
180 days.
(ii) a term loan inclusive of unpaid interest,
when the instalment is overdue for a period of
more than 180 days or on which interest
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Regulation) Directions, 2023
c) a demand or call loan, which remained
overdue for a period of six months or more
from the date of demand or call or on which
interest amount remained overdue for a
period of six months or more;
d) a bill which remains overdue for a period of
six months or more;
e) the interest in respect of a debt or the
income on receivables under the head 'other
current assets' in the nature of short term
loans / advances, which facility remained
overdue for a period of six months or more;
f) any dues on account of sale of assets or
services rendered or reimbursement of
expenses incurred, which remained overdue
for a period of six months or more;
g) the lease rental and hire purchase
instalment, which has become overdue for a
period of twelve months or more;
h) in respect of loans, advances and other
credit facilities (including bills purchased and
discounted), the balance outstanding under
the credit facilities (including accrued interest)
made available to the same borrower /
beneficiary when any of the above credit
facilities becomes non-performing asset;
Provided that in the case of lease and hire
purchase transactions, an applicable NBFC
shall classify each such account on the basis
of its record of recovery.
amount remained overdue for a period of
more than 180 days.
(iii) a demand or call loan, which remained
overdue for a period of more than 180 days
from the date of demand or call or on which
interest amount remained overdue for a
period of more than 180 days.
(iv) a bill which remains overdue for a period
of more than 180 days.
(v) the interest in respect of a debt or the
income on receivables under the head 'other
current assets' in the nature of short-term
loans/advances, which facility remained
overdue for a period of more than 180 days
(vi) any dues on account of sale of assets or
services rendered or reimbursement of
expenses incurred, which remained overdue
for a period of more than 180 days.
(vii) the lease rental and hire purchase
instalment, which has become overdue for a
period of more than 180 days.
(viii) in respect of loans, advances and other
credit facilities (including bills purchased and
discounted), the balance outstanding under
the credit facilities (including accrued interest)
made available to the same borrower/
beneficiary when any of the above credit
facilities becomes non-performing asset.
Provided that in the case of lease and hire
purchase transactions, an applicable NBFC
shall classify each such account on the basis
of its record of recovery.
Note: The period of more than 180 days for
NPA classification as mentioned above shall
be adjusted as per glide path outlined in
paragraph 14.2.
17.
Non-
Performing
Asset (SMA
Classification)
Applicable to NBFC-ND-NSI asset size
below 500 crore
Every NBFC shall recognise incipient stress
in loan accounts, immediately on default, by
classifying such assets as special mention
accounts (SMA) as per the following
categories:
Section II – Regulations applicable for
NBFCs – BL asset size upto 1000 crore
Para 14.4.2
Every NBFC shall recognise incipient stress
in loan accounts, immediately on default, by
classifying such assets as special mention
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SMA
Subcate
gories
Basis for classification -
Principal or interest
payment or any other
amount wholly or partly
overdue
SMA – 0
Upto 30 days
SMA – 1
More than 30 days and upto
60 days
SMA – 2
More than 60 days and upto
180 days
accounts (SMA) as per the following
categories:
SMA
Subcat
egories
Basis for classification
- Principal or interest
payment or any other
amount wholly or
partly overdue
SMA – 0
Upto 30 days
SMA – 1
More than 30 days and upto
60 days
SMA – 2
More than 60 days and upto
180 days
Note: The period of SMA-2 shall be adjusted
as per glide path outlined in paragraph 14.2.
18.
Provisioning
Requirements
The provisioning requirements as given
below shall apply to every applicable NBFC
(except NBFC-MFIs)
Section II – Regulations applicable for
NBFCs – BL
Para 15
The provisioning requirements as given
below shall apply to every NBFC (except
microfinance loans of NBFC-MFIs).
19.
Standard
Asset
Provisioning
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
Every applicable NBFC shall make provision
for standard assets at 0.25 per cent of the
outstanding, which shall not be reckoned for
arriving at net NPAs. The provision towards
standard assets need not be netted from
gross advances but shall be shown
separately as 'Contingent Provisions against
Standard Assets' in the balance sheet.
Provision applicable to NBFC-ND-SI asset
size above 500 crore
Every applicable NBFC shall make provisions
for standard assets at 0.40 per cent by the
end of March 2018 and thereafter, of the
Section II – Regulations applicable for
NBFCs – BL (asset size upto 1000 crore)
Para 16
Standard asset provisioning (except NBFC-
ML and above)
NBFC-BL shall make provision for standard
assets at 0.25 percent of the outstanding,
which shall not be reckoned for arriving at net
NPAs. The provision towards standard assets
need not be netted from gross advances but
shall be shown separately as 'Contingent
Provisions against Standard Assets' in the
balance sheet.
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outstanding, which shall not be reckoned for
arriving at net NPAs. The provision towards
standard assets need not be netted from
gross advances but shall be shown
separately as ‘Contingent Provisions against
Standard Assets’ in the balance sheet.
20.
Non-
Cooperative
Borrowers
Provisions applicable to all the NBFCs
irrespective of their asset size.
All Notified NBFCs shall identify "non-co-
operative borrowers".
Section II – Regulations applicable for
NBFCs – BL
Para 21
All NBFC-Factors, NBFCs-D and non-deposit
taking NBFCs of asset size of ₹500 crore and
above (Notified NBFCs) shall identify "non-
cooperative borrowers"
21.
Early
Recognition of
Financial
Distress,
Prompt Steps
for Resolution
and Fair
Recovery for
Lenders:
Framework for
Revitalizing
Distressed
Assets in the
Economy
Framework for Revitalizing Distressed Assets
in the Economy (Framework) as provided for
in Annex XVIII shall apply to all NBFC-
Factors.
Section II – Regulations applicable for
NBFCs – BL
Para 25 -Framework for Revitalizing
Distressed Assets in the Economy
(Framework) as provided in Annex IV shall
apply to non-deposit taking NBFCs with asset
size less than ₹500 crore.
22.
Credit/investm
ent
concentration
norms for
NBFCs
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
Concentration of credit/ investment for
applicable NBFC
(1) An applicable NBFC which is held by an
NOFHC shall not
(i) have any exposure (credit and investments
including investments in the equity/ debt
capital instruments) to the Promoters/
Promoter Group entities or individuals
associated with the Promoter Group or the
NOFHC;
Section II – Regulations applicable for
NBFCs – BL (asset size upto 1000 crore)
Para 32
An NBFC which is held by an NOFHC shall
not
(i) have any exposure (credit and investments
including investments in the equity/debt
capital instruments) to the
Promoters/Promoter Group entities or
individuals associated with the Promoter
Group or the NOFHC;
(ii) make investment in the equity/debt capital
instruments in any of the financial entities
under the NOFHC;
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Regulation) Directions, 2023
(ii) make investment in the equity/ debt capital
instruments in any of the financial entities
under the NOFHC;
(iii) invest in equity instruments of other
NOFHCs.
Explanation: For the purposes of this
paragraph, the expression, 'Promoter' and
'Promoter Group' shall have the meanings
assigned to those expressions in the
"Guidelines for Licensing of New Banks in the
Private Sector" issued by the Bank - Annex V.
(iii) invest in equity instruments of other
NOFHCs.
Explanation: For the purposes of this
paragraph, the expression, 'Promoter' and
'Promoter Group' shall have the meanings
assigned to those expressions in Annex I of
"Guidelines for Licensing of New Banks in the
Private Sector" dated February 22, 2013,
issued by the Reserve Bank.
23.
Declaration of
dividends
Provisions applicable to NBFC-ND-SI
asset size above 500 crore
NBFCs shall comply with the following
guidelines to declare dividends.
(1) The Board of Directors, while considering
the proposals for………..
…………(5)……………….. The Reserve
Bank shall not entertain any request for ad-
hoc dispensation on declaration of dividend.
(6) NBFCs declaring dividend shall report
details of dividend declared during the
financial year as per the format prescribed in
Annex IX. The report shall be furnished within
a fortnight after declaration of dividend to the
Regional Office of the Department of
Supervision of the Reserve Bank.
Section II – Regulations applicable for
NBFCs – BL
Para 3 3
NBFCs shall comply with the following
guidelines to declare dividends.
33.1 The Board of Directors, while
considering the proposals for dividend, shall
take into account each of the following
aspects:………………………….33.5
…………………The Reserve Bank shall not
entertain any request for ad-hoc dispensation
on declaration of dividend.
33.6 NBFCs, other than NBFCs-BL,
declaring dividend shall report details of
dividend declared during the financial year as
per the format prescribed in Annex IX. The
report shall be furnished within a fortnight
after declaration of dividend to the Regional
Office of the Department of Supervision of the
Reserve Bank.
24.
Fair Practices
Code
NBFCs having customer interface shall adopt
the following guidelines:
Section II – Regulations applicable for
NBFCs – BL
Para 45 -
NBFCs having customer interface shall adopt
the following guidelines:
For the purpose of this paragraph, the term
‘personal loans’ shall have the same meaning
as defined in the Annex to the circular on
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‘XBRL Returns – Harmonization of Banking
Statistics’ dated January 04, 2018.
25.
Appointment of
Non-Deposit
Accepting
NBFCs as sub-
agents under
Money
Transfer
Service
Schemes
(MTSS)
Applicable NBFCs may act as sub-agents
under MTSS without any prior approval of the
Bank.
Section II – Regulations applicable for
NBFCs – BL
Para 62
NBFCs may act as sub-agents under MTSS
without any prior approval of the Reserve
Bank. Deposit accepting NBFCs shall not
undertake such activity.
26.
Undertaking of
Point of
Presence
Services under
Pension Fund
Regulatory and
Development
Authority for
National
Pension
System
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
Applicable NBFCs shall not undertake Point
of Presence (PoP) services for National
Pension System (NPS) under Pension Fund
Regulatory and Development Authority.
Section II – Regulations applicable for
NBFCs – BL (asset size upto 1000 crore)
NBFC-BL shall not undertake Point of
Presence (PoP) services for National Pension
System (NPS) under Pension Fund
Regulatory and Development Authority.
27.
Filing of
records of
mortgages with
the Central
Registry
Applicable NBFCs shall file and register the
records of equitable mortgages created in
their favour on or after March 31, 2011 with
the Central Registry of Securitisation Asset
Reconstruction and Security Interest of India
(CERSAI) and shall also register the records
with the Central Registry as and when
equitable mortgages are created in their
favour. Applicable NBFCs shall register all
types of mortgages with CERSAI.
Section II – Regulations applicable for
NBFCs – BL
Para 68 - NBFCs shall file and register the
records of equitable mortgages created in
their favour on or after March 31, 2011 with
the Central Registry of Securitisation Asset
Reconstruction and Security Interest of India
(Central Registry) and shall also register the
records with the Central Registry as and
when equitable mortgages are created in
their favour. NBFCs shall register all types of
mortgages with Central Registry and adhere
to the provisions contained in the circular
‘Filing of Security Interest relating to
Immovable (other than equitable mortgage),
Movable and Intangible Assets in CERSAI’
dated December 27, 2018, as amended from
time to time.
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28.
Migration of
Post-Dated
Cheques
(PDCs)/
Equated
Monthly
Instalment
(EMI) Cheques
to National
Automated
Clearing
House(NACH)(
Debit)
Considering the protection available under
section 25 of the Payment and Settlement
Systems Act, 2007 which accords the same
rights and remedies to the payee
(beneficiary) against dishonour of electronic
funds transfer instructions on grounds of
insufficiency of funds as are available under
section 138 of the Negotiable Instruments
Act, 1881, there shall be no need for
applicable NBFCs to take additional cheques,
if any, from customers in addition to ECS
(Debit) mandates. Cheques complying with
CTS-2010 standard formats shall alone be
obtained in locations, where the facility of
ECS/ RECS is not available.
Section II – Regulations applicable for
NBFCs – BL
Para 76
Considering the protection available under
section 25 of the Payment and Settlement
Systems Act, 2007 which accords the same
rights and remedies to the payee
(beneficiary) against dishonour of electronic
funds transfer instructions on grounds of
insufficiency of funds as are available under
section 138 of the Negotiable Instruments
Act, 1881, there shall be no need for NBFCs
to take additional cheques, if any, from
customers in addition to NACH (Debit)
mandates. Accordingly, NBFCs have been
advised not to accept fresh/ additional PDCs
or EMI cheques from their customers.
Cheques complying with CTS-2010 standard
formats alone shall be obtained in locations,
where the facility of NACH is not available.
29.
Capital
Requirement
(1) Every applicable NBFC shall maintain a
minimum capital ratio consisting of Tier I and
Tier II capital which shall not be less than 15
per cent of its aggregate risk weighted assets
on-balance sheet and of risk adjusted value
of off-balance sheet items.
(2) The Tier I capital in respect of applicable
NBFCs (other than NBFC-MFI), at any point
of time, shall not be less than 10 per cent.
(3) Applicable NBFCs primarily engaged in
lending against gold jewellery (such loans
comprising 50 per cent or more of their
financial assets) shall maintain a minimum
Tier l capital of 12 per cent.
Section III – Regulations applicable for
NBFCs – ML
Para 81
81.1 NBFCs shall maintain a minimum capital
ratio consisting of Tier 1 and Tier 2 capital
which shall not be less than 15 percent of its
aggregate risk weighted assets on balance
sheet and of risk adjusted value of off-
balance sheet items.
81.2 Tier 1 capital in respect of NBFC (except
NBFC-MFI and NBFC primarily engaged in
lending against gold jewellery), at any point of
time, shall not be less than 10 percent. i.e. for
NBFCs with such loans comprising 50
percent of more of their financial assets, Tier I
capital shall be minimum of 12% as
prescribed in paragraph 9.2 of these
Directions.
30.
Non-
Performing
Asset
Provisions applicable to NBFC-ND-SI
asset size above 500 crore
(v) Non-Performing Asset (referred to in these
Directions as “NPA”) shall mean:
Section III – Regulations applicable for
NBFCs – ML asset size 1000 crore and
above
Para 87.1.5
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(a) an asset, in respect of which, interest has
remained overdue for a period of three
months or more;
(b) a term loan inclusive of unpaid interest,
when the instalment is overdue for a period of
three months or more or on which interest
amount remained overdue for a period of
three months or more;
(c) a demand or call loan, which remained
overdue for a period of three months or more
from the date of demand or call or on which
interest amount remained overdue for a
period of three months or more;
(d) a bill which remains overdue for a period
of three months or more;
(e) the interest in respect of a debt or the
income on receivables under the head ‘other
current assets’ in the nature of short term
loans/ advances, which facility remained
overdue for a period of three months or more;
(f) any dues on account of sale of assets or
services rendered or reimbursement of
expenses incurred, which remained overdue
for a period of three months or more;
(g) the lease rental and hire purchase
instalment, which has become overdue for a
period of three months or more;
(h) in respect of loans, advances and other
credit facilities (including bills purchased and
discounted), the balance outstanding under
the credit facilities (including accrued interest)
made available to the same borrower/
beneficiary when any of the above credit
facilities becomes non-performing asset:
Provided that in the case of lease and hire
purchase transactions, an applicable NBFC
shall classify each such account on the basis
of its record of recover
(i) an asset, in respect of which, interest has
remained overdue for a period of more than
90 days.
(ii) a term loan inclusive of unpaid interest,
when the instalment is overdue for a period of
more than 90 days or on which interest
amount remained overdue for a period of
more than 90 days.
(iii) a demand or call loan, which remained
overdue for a period of more than 90 days
from the date of demand or call or on which
interest amount remained overdue for a
period of more than 90 days
(iv) a bill which remains overdue for a period
of more than 90 days.
(v) the interest in respect of a debt or the
income on receivables under the head 'other
current assets' in the nature of short-term
loans/advances, which facility remained
overdue for a period of more than 90 days.
(vi) any dues on account of sale of assets or
services rendered or reimbursement of
expenses incurred, which remained overdue
for a period of more than 90 days.
(vii) the lease rental and hire purchase
instalment, which has become overdue for a
period of more than 90 days.
(viii) in respect of loans, advances and other
credit facilities (including bills purchased and
discounted), the balance outstanding under
the credit facilities (including accrued interest)
made available to the same
borrower/beneficiary when any of the above
credit facilities becomes non-performing
asset.
Provided that in the case of lease and hire
purchase transactions, an NBFC shall
classify each such account on the basis of its
record of recovery.
31.
Credit/Investm
ent
concentration
Norms (except
NBFC-UL)
Provisions applicable to NBFC-ND-SI
asset size above 500 crore
(1) No applicable NBFC shall,
Section IV – Regulations applicable for
NBFCs – ML asset size above 1000 crore
Para 91
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(i) lend to
(a) any single borrower exceeding fifteen per
cent of its owned fund; and
(b) any single group of borrowers exceeding
twenty five per cent of its owned fund;
(ii) invest in
(a) the shares of another company exceeding
fifteen per cent of its owned fund; and
(b) the shares of a single group of companies
exceeding twenty five per cent of its owned
fund;
(iii) lend and invest (loans/ investments taken
together) exceeding
(a) twenty five per cent of its owned fund to a
single party; and
(b) forty per cent of its owned fund to a single
group of parties.
Provided that the ceiling on the investment in
shares of another company shall not be
applicable to an applicable NBFC in respect
of investment in the equity capital of an
insurance company up to the extent
specifically permitted, in writing, by the Bank.
Provided further that an applicable NBFC
may exceed the concentration of
credit/investment norms, by 5 per cent for any
single party and by 10 per cent for a single
group of parties, if the additional exposure is
on account of infrastructure loan and/ or
investment.
Provided further that nothing contained in this
paragraph shall apply to
(A) investments of applicable NBFCs in
shares of
i. its subsidiaries;
ii. companies in the same group, to the extent
they have been reduced from Owned Funds
for the calculation of NOF and
(B) the book value of debentures, bonds,
outstanding loans and advances (including
Credit/investment concentration Norms
(except NBFC-UL)
91.1 NBFC(except NBFC-IFC) shall not have
exposure (credit/investment taken together)
exceeding
(a) twenty-five percent of its Tier 1 capital to a
single party; and
(b) forty percent of its Tier 1 capital to a single
group of parties,
Provided that an NBFC may exceed the
exposure norm specified above, by 5 percent
for any single party and by 10 percent for a
single group of parties, if the additional
exposure is on account of infrastructure loan
and/or investment.
91.2 NBFC-IFC shall not have exposure
(credit/investment taken together) exceeding
(a) thirty percent of its Tier 1 capital to a
single party; and
(b) fifty percent of its Tier 1 capital to a single
group of parties.
91.3 The ceiling on the investment in shares
of another company shall not be applicable to
an NBFC in respect of investment in the
equity capital of an insurance company up to
the extent specifically permitted, in writing, by
the Reserve Bank.
91.4 Exposure norms shall not apply to any
NBFC not accessing public funds in India,
either directly or indirectly and not issuing
guarantees.
91.5 Exposure norms shall not apply to
(i) investments of NBFC in shares of
(a) its subsidiaries;
(b) companies in the same group, to the
extent they have been reduced from Owned
Funds for the calculation of NOF and
(ii) the book value of debentures, bonds,
outstanding loans and advances (including
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hire-purchase and lease finance) made to,
and deposits with,-
i. subsidiaries of the applicable NBFC; and
ii. companies in the same group, to the extent
they have been reduced from Owned Funds
for the calculation of NOF.
Provided that Infrastructure Finance
Companies may exceed the concentration of
credit norms
(A) in lending to:
i. any single borrower, by ten per cent of its
owned fund; and
ii. any single group of borrowers, by fifteen
per cent of its owned fund;
(B) in lending to and investing in, (loans/
investments taken together)
i. a single party, by five percent of its owned
fund; and
ii. a single group of parties, by ten percent of
its owned fund.
Provided further that the concentration of
credit/ investment norms shall not apply to
any applicable NBFC not accessing public
funds in India, either directly or indirectly and
not issuing guarantees.
(2) Every applicable NBFC (other than NBFC-
D) shall formulate a policy in respect of
exposures to a single party / a single group of
parties.
(3) An applicable NBFC which is held by an
NOFHC shall not
(i) have any exposure (credit and investments
including investments in the equity/ debt
capital instruments) to the Promoters/
Promoter Group entities or individuals
associated with the Promoter Group or the
NOFHC;
hire purchase and lease finance) made to,
and deposits with -
(a) subsidiaries of the NBFC; and
(b) companies in the same group, to the
extent they have been reduced from Owned
Funds for the calculation of NOF.
91.6 NBFC shall formulate a policy in respect
of exposures to a single party/a single group
of parties.
91.7 Government NBFCs set up to serve
specific sectors may approach the Reserve
Bank for exemptions, if any.
Notes:
1. For determining the limits, off-balance
sheet exposures shall be converted into
credit risk by applying the conversion factors,
as explained in paragraph 85 of these
Directions.
2. These ceilings shall be applicable to the
exposure by an NBFC to
companies/firms/entities in its own group as
well as to the borrowers/investee entity’s
group.
3. (i) In case of factoring on "with-recourse"
basis, the exposure shall be reckoned on the
assignor.
(ii) In case of factoring on "without-recourse"
basis, the exposure shall be reckoned on the
debtor, irrespective of credit risk cover/
protection provided, except in cases of
international factoring where the entire credit
risk has been assumed by the import factor.
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(ii) make investment in the equity/ debt capital
instruments in any of the financial entities
under the NOFHC;
(iii) invest in equity instruments of other
NOFHCs.
Explanation: For the purposes of this
paragraph, the expression, 'Promoter' and
'Promoter Group' shall have the meanings
assigned to those expressions in the
"Guidelines for Licensing of New Banks in the
Private Sector" issued by the Bank – Annex
VI.
Notes:
1. For determining the limits, off-balance
sheet exposures shall be converted into
credit risk by applying the conversion factors
as explained in paragraph ‘Explanation II’ of
Chapter IV of these Directions.
2. The investments in debentures for the
purposes specified in this paragraph shall be
treated as credit and not investment.
3. These ceilings shall be applicable to the
credit/ investment by an applicable NBFC to
companies/firms in its own group as well as
to the borrowers/ investee company’s group.
4. a. In case of factoring on "with-recourse"
basis, the exposure shall be reckoned on the
assignor.
b. In case of factoring on "without-recourse"
basis, the exposure shall be reckoned on the
debtor, irrespective of credit risk cover/
protection provided, except in cases of
international factoring where the entire credit
risk has been assumed by the import factor.
SBR Framework
Concentration of credit/ investment - The
extant credit concentration limits prescribed
for NBFCs separately for lending and
investments shall be merged into a single
exposure limit of 25% for single borrower/
party and 40% for single group of borrowers/
parties. Further, the concentration limits shall
be determined with reference to the NBFC’s
Tier 1 capital instead of their Owned Fund.
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The revised norms are indicated in the table
below:
NBFC-UL shall follow these norms till Large
Exposure Framework is put in place for them.
Extant instructions on concentration norms
for different categories of NBFC, other than
the changes indicated above, will continue to
remain applicable.
32.
Nomination
and
Remuneration
Committee
Nomination Committee
All applicable NBFCs shall form a Nomination
Committee to ensure 'fit and proper' status of
proposed/ existing directors.
Explanation I: The Nomination Committee
constituted under this paragraph shall have
the same powers, functions and duties as laid
down in section 178 of the Companies Act,
2013.
Section IV – Regulations applicable for
NBFCs – ML
Para 94.2
Nomination and Remuneration Committee
NBFCs (except Government NBFCs) shall
form a Nomination and Remuneration
Committee (NRC) which shall have the
constitution, powers, functions and duties as
laid down in section 178 of the Companies
Act, 2013.
Explanation I: Government NBFCs shall form
a Nomination Committee to ensure 'fit and
proper' status of proposed/ existing directors.
Nomination Committee so constituted shall
have the same powers, functions and duties
as laid down in section 178 of the Companies
Act, 2013.
Explanation II - If an NBFC is required to
constitute NRC under section 178 of the
Companies Act, 2013, the NRC so
constituted by it shall be treated as the NRC/
Nomination Committee for the purpose of this
paragraph.
23 PwC
Regulatory Insights
Sr.No.
Particulars
Previous Master Directions and other
Circulars
1
Master Direction - RBI (Non-Banking
Financial Company – Scale Based
Regulation) Directions, 2023
33.
Participation in
Currency
Options
Non-deposit taking applicable NBFCs with
asset size of ₹500 crore and above, are
allowed to participate in the designated
currency options exchanges recognized by
SEBI, as clients, subject to the Bank’s
(Foreign Exchange Department) guidelines in
the matter, only for the purpose of hedging
their underlying forex exposures. Disclosures
shall be made in the balance sheet regarding
transactions undertaken, in accordance with
the guidelines issued by SEBI.
Section IV – Regulations applicable for
NBFCs – ML
Para 101
Non-deposit taking NBFCs are allowed to
participate in the designated currency options
exchanges recognized by SEBI, as clients,
subject to the guidelines of Foreign Exchange
Department of the Reserve Bank, only for the
purpose of hedging their underlying forex
exposures. Disclosures shall be made in the
balance sheet regarding transactions
undertaken, in accordance with the guidelines
issued by SEBI.
34.
Ready
Forward
Contracts in
Corporate
Debt Securities
Non-deposit taking applicable NBFCs with
asset size of ₹500 crore and above are
eligible to participate in repo transactions in
corporate debt securities. They shall comply
with Repurchase Transactions (Repo)
(Reserve Bank) Directions, 2018 as amended
from time to time.
(a) Capital Adequacy
Risk weights for credit risk for assets that are
the collateral for such transactions as well as
risk weights for the counterparty credit risk
shall be as applicable to the issuer/
counterparty under Chapter IV of these
directions.
(b) Classification of balances in the accounts
Classification of balances in the various
accounts viz. repo account, reverse repo
account etc. shall be done in the relevant
schedules similar to that of banks.
In all other matters related to such repo
transactions, non-deposit taking applicable
NBFCs with asset size of ₹500 crore and
above, shall follow the Directions and
accounting guidelines issued by Internal Debt
Management Department, of the Bank.
Section IV – Regulations applicable for
NBFCs – ML
Para 103
Non-deposit taking NBFCs are eligible to
participate in repo transactions in corporate
debt securities. They shall comply with
‘Repurchase Transactions (Repo) (Reserve
Bank) Directions, 2018’ dated July 24, 2018,
as amended from time to time and also
adhere to the following instructions.
(i) Capital Adequacy
Risk weights for credit risk for assets that are
the collateral for such transactions as well as
risk weights for the counterparty credit risk
shall be as applicable to the issuer/
counterparty under paragraphs 84 and 85 of
these Directions.
(ii) Classification of balances in the accounts
Classification of balances in the various
accounts viz. repo account, reverse repo
account etc. shall be done in the relevant
schedules similar to that of banks.
103.2 In all other matters related to such repo
transactions, non-deposit taking NBFCs, shall
follow the directions and accounting
guidelines issued by Financial Markets
Regulation Department of the Reserve Bank.
24 PwC
Regulatory Insights
Sr.No.
Particulars
Previous Master Directions and other
Circulars
1
Master Direction - RBI (Non-Banking
Financial Company – Scale Based
Regulation) Directions, 2023
35.
Capital
Requirement
NBFC-MFIs shall maintain a capital adequacy
ratio consisting of Tier I and Tier II Capital
which shall not be less than 15 percent of its
aggregate risk weighted assets on-balance
sheet and of risk adjusted value of off-
balance sheet items. The total of Tier II
Capital at any point of time, shall not exceed
100 percent of Tier I Capital.
Note:
Explanations:……………………………………
Section VI – Specific Directions applicable
for Non-Banking Financial Company –
Micro Finance Institutions (NBFC-MFIs)
and Microfinance Loans of other NBFCs
Para 116
NBFC-MFIs shall maintain a capital adequacy
ratio consisting of Tier 1 and Tier 2 capital
which shall not be less than 15 percent of its
aggregate risk weighted assets of on-balance
sheet and of risk adjusted value of off-
balance sheet items. The total of Tier 2
capital at any point of time, shall not exceed
100 percent of Tier 1 capital. The treatment to
on-balance and off-balance sheet assets for
capital adequacy shall be as provided in
paragraph 84 and 85 of the Directions
respectively. NBFC-MFIs shall also adhere to
provisions in paragraph 86 of the Directions
on treatment of deferred tax assets and
deferred tax liabilities for computation of
capital.
116.1.2 For loans guaranteed under any
existing or future schemes launched by
CGTMSE, CRGFTLIH and NCGTC, NBFC-
MFIs shall assign risk weight as per the
instructions specified in Note (4) of paragraph
84 of Chapter IX of these Directions.
36.
Asset
Classification
NSI Master Directions:
In addition to the prudential norms contained
in Chapter IV of these Directions, for an
NBFC-Factor, a receivable acquired under
factoring which is not paid within six months
of due date as applicable, shall be treated as
NPA irrespective of when the receivable was
acquired by the factor or whether the
factoring was carried out on "with recourse"
basis or "without-recourse" basis. The entity
on which the exposure was booked shall be
shown as NPA and provisioning made
accordingly.
SI Master Directions:
In addition to the prudential norms contained
in Chapter V of these Directions, for an
NBFC-Factor or an NBFC-ICC, a receivable
acquired under factoring which is not paid
within three months of due date as
Section VII – Specific Directions
applicable for NBFC-Factors and NBFC-
ICCs Registered under the Factoring
Regulation Act, 2011
Para 125
125.1 NBFCs-Factors with asset size of less
than ₹500 crore
In addition to the Asset Classification norms
contained in paragraph 14 of the Directions,
for NBFC-Factors with asset size of less than
₹500 crore, a receivable acquired under
factoring which has remained overdue for
more than 180 days of due date as
applicable, shall be treated as NPA
irrespective of when the receivable was
acquired by the NBFC Factor or whether the
factoring was carried out on "with recourse"
basis or "without recourse" basis. Further,
glide path for recognition of NPA as
25 PwC
Regulatory Insights
Sr.No.
Particulars
Previous Master Directions and other
Circulars
1
Master Direction - RBI (Non-Banking
Financial Company – Scale Based
Regulation) Directions, 2023
applicable, shall be treated as nonperforming
asset (NPA) irrespective of when the
receivable was acquired by the factor or
whether the factoring was carried out on "with
recourse" basis or "without recourse" basis.
The entity on which the exposure was booked
shall be shown as NPA and provisioning
made accordingly.
prescribed in paragraph 14.2 of the Directions
shall also be applicable to such NBFC-
Factors. The entity on which the exposure
was booked shall be shown as NPA and
provisioning made accordingly.
125.2 NBFC-Factors with asset size of ₹500
crore and above and NBFC-ICCs granted
CoR under the Factoring Regulation Act,
2011
In addition to the Asset Classification norms
contained in paragraph 87 of the Directions,
for NBFC-Factors with asset of size of ₹500
crore and above or an NBFC-ICC which have
been granted CoR under the Factoring
Regulation Act, 2011, a receivable acquired
under factoring which has remained overdue
for more than 90 days of due date as
applicable, shall be treated as NPA
irrespective of when the receivable was
acquired by the NBFC Factor/ concerned
NBFC-ICC or whether the factoring was
carried out on "with recourse" basis or
"without-recourse" basis. The entity on which
the exposure was booked shall be shown as
NPA and provisioning made accordingly.
37.
Annex IV
Early
Recognition of
Financial
Distress,
Prompt Steps
for Resolution
and Fair
Recovery for
Lenders:
Framework for
Revitalizing
stressed
Assets in the
Economy
Provisions applicable to NBFC-ND-NSI
asset size below 500 crore
The Reserve Bank of India has set up a
Central Repository of Information on Large
Credits (CRILC) to collect, store, and
disseminate credit data to lenders as advised
by the Bank in its Circular No.
DBS.No.OSMOS. 9862/33.01.018/2013-14
dated February 13, 2014 issued by the
Department of Banking Supervision. All
NBFCs, (Notified NBFCs, for short) shall be
required to report the relevant credit
information on a quarterly basis in the
enclosed formats given in Annex I to CRILC
once the XBRL reporting mechanism is
established. Till then they shall forward the
information to PCGM, Department of Banking
Supervision, Reserve Bank of India, World
Trade Centre, Mumbai - 400 005 in hard
copy. The data includes credit information on
all the borrowers having aggregate fund-
based and non-fund based exposure of ₹ 5
crore and above with them and the SMA
status of the borrower. The
Section II – Regulations applicable for
NBFCs – BL (asset size upto 1000 crore)
Para 1.1.2.
The Reserve Bank has set up a Central
Repository of Information on Large Credits
(CRILC) to collect, store, and disseminate
credit data to lenders as advised by the
Reserve Bank in its circular ‘Central
Repository of Information on Large Credits
(CRILC) – Revision in Reporting’ dated
February 13, 2014 issued by the Department
of Supervision. All NBFC-Factors, NBFC-D
and non-deposit taking NBFCs of asset size
of ₹500 crore and above (Notified NBFCs),
shall be required to report the relevant credit
information to CRILC. The data includes
credit information on all the borrowers having
aggregate fund-based and non-fund based
exposure of ₹5 crore and above with them
and the SMA status of the borrower.
26 PwC
Regulatory Insights
The takeaways
The MD compiles and consolidates the existing provisions of the Master Directions applicable to the Systemically
Important and Non-Systemically Important NBFCs in one place. Further, the MD brings in the necessary clarity
with respect to the regulatory requirements for different layers of NBFC, specifically for NBFCs with asset size of
more than INR 500 crore falling in the Base Layer.
pwc.in
In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity
Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each
member firm of which is a separate legal entity.
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Regulatory Insights
About PwC
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