1. Infrastructure Finance Company

An Infrastructure Finance Company is an NBFC primarily engaged in providing finance to infrastructure projects and infrastructure-related businesses. To qualify as an IFC, the company must satisfy prescribed conditions relating to infrastructure lending exposure, net owned funds, credit rating and capital adequacy.

2. Investment and Credit Company

An Investment and Credit Company is a category introduced by RBI by merging asset finance companies, investment companies and loan companies into a single classification. Its principal business may include lending, asset finance, investment in securities and acquisition of other financial assets.

3. Systemically Important Core Investment Company

Core Investment Companies are NBFCs primarily engaged in holding investments in shares and securities, usually within group companies. Systemically important CICs must comply with conditions relating to asset size, access to public funds, investment composition, capital requirements and restrictions on certain financial activities.

4. Non-Operative Financial Holding Company

A Non-Operative Financial Holding Company is a financial holding structure that enables promoters to establish a banking group and hold banks along with other regulated financial services entities under the applicable regulatory framework.

5. Mortgage Guarantee Company

A Mortgage Guarantee Company provides guarantees in relation to mortgage-backed exposures and assumes the risk of potential loss if the borrower defaults on repayment obligations.

6. NBFC-Factor

An NBFC-Factor is primarily engaged in factoring business, including acquisition of receivables and providing finance against trade receivables in accordance with applicable RBI regulations.

7. Microfinance Institution

An NBFC-MFI provides microfinance loans to eligible borrowers, usually focused on low-income households and small borrowers, subject to regulatory conditions relating to loan size, borrower eligibility, pricing and repayment norms.

8. Infrastructure Debt Fund NBFC

An Infrastructure Debt Fund NBFC is established to facilitate long-term debt financing for infrastructure projects. It generally raises resources through specified instruments and invests in eligible infrastructure-related debt assets under the applicable RBI framework.

1. Disclosure Requirements

Base Layer NBFCs must ensure appropriate disclosures relating to related party transactions, loans to directors or senior officers, and Board-approved policies for related party lending, wherever applicable.

2. ICAAP Requirement

Base Layer NBFCs are generally exempt from Internal Capital Adequacy Assessment Process requirements, unless specifically directed otherwise.

3. Concentration of Credit and Investment

Existing concentration norms continue to apply to Base Layer NBFCs, unless revised or specifically notified by the RBI.

4. Sensitive Sector Exposure Compliance

Sensitive Sector Exposure compliance may not apply to Base Layer NBFCs in the same manner as it applies to Middle Layer and Upper Layer NBFCs.

5. Regulatory Restrictions on Loans

Certain loan-related regulatory restrictions applicable to higher-layer NBFCs may not apply to Base Layer NBFCs, subject to applicable RBI directions.

6. KMP Restrictions

Restrictions on Key Managerial Personnel may not apply in the same manner to Base Layer NBFCs. A director in a Base Layer NBFC may hold a similar position in another NBFC, subject to the Companies Act, RBI directions and other applicable laws.

7. Independent Directors

Independent directors may hold positions in other entities as permitted under the Companies Act, 2013 and applicable regulatory requirements.

1. ICAAP Compliance

NBFCs in the Middle Layer and Upper Layer are required to carry out a detailed internal assessment of capital adequacy in line with the risks associated with their business model, similar to the ICAAP framework applicable to commercial banks.

2. Concentration of Credit and Investment

Separate lending and investment exposure limits have been consolidated into a single exposure limit. The limit is computed as a percentage of Tier 1 capital instead of owned funds.

3. Sensitive Sector Exposure

NBFCs are required to set Board-approved internal limits for sensitive sector exposure, separately for capital market exposure and commercial real estate exposure. Housing Finance Companies continue to follow the applicable HFC-specific regulations.

4. KMP Restrictions

Key Managerial Personnel of Middle Layer and Upper Layer NBFCs are restricted from holding office, including directorship, in another NBFC-ML or NBFC-UL, subject to applicable exemptions and regulatory conditions.

5. Independent Director Restrictions

Independent directors are restricted from serving on the Board of more than three NBFCs at the same time, subject to applicable regulatory provisions.

6. Enhanced Financial Statement Disclosures

NBFCs are required to provide additional disclosures in their annual financial statements, including governance, audit and risk-related information.

• Corporate governance report
• Disclosure of modified audit opinion
• Exceptional income or expenses
• Breach of covenants or defaults
• Divergence in asset classification and provisioning

7. Chief Compliance Officer Requirement

Middle Layer and Upper Layer NBFCs are required to establish an independent compliance function and appoint a Chief Compliance Officer to strengthen regulatory oversight.

8. Compensation Guidelines

NBFCs must adopt a Board-approved compensation policy for Key Managerial Personnel and senior management to ensure prudent risk-taking and governance discipline.

• Constitution of a Remuneration Committee
• Clear principles for fixed and variable pay structures
• Malus and clawback provisions

9. Additional Governance Requirements

NBFCs in the Middle Layer and Upper Layer must also comply with enhanced governance standards, including:

• Clearly defining the roles of Board-level committees
• Formulating and implementing a whistle-blower mechanism
• Ensuring sound corporate governance practices in subsidiaries

10. Core Financial Solutions

Implementation of Core Financial Solutions is mandatory for NBFCs having 10 or more branches, as per the applicable regulatory framework.

1. Revised Capital Guidelines

• Upper Layer NBFCs are required to maintain Common Equity Tier 1 capital of at least 9% of risk-weighted assets.
• Leverage requirements are applicable to Upper Layer NBFCs, and the RBI may prescribe suitable leverage ceilings from time to time.
• Differential standard asset provisioning requirements may apply, broadly aligned with the prudential provisioning framework applicable to banks.

2. Internal Exposure Limits

Upper Layer NBFCs must set Board-approved internal exposure limits for important sectors where credit exposure is extended. These limits are in addition to Sensitive Sector Exposure limits applicable to both Middle Layer and Upper Layer NBFCs.

3. Qualification and Experience of Directors

The Board of Directors should have an appropriate mix of educational qualifications, professional expertise, sectoral knowledge and relevant experience to ensure sound governance and effective oversight.

4. Listing and Disclosure Requirements

NBFCs classified in the Upper Layer are required to be listed within three years from the date of identification as NBFC-UL. Unlisted NBFC-ULs should prepare a Board-approved roadmap to comply with disclosure and governance requirements applicable to listed companies.

5. Removal or Resignation of Independent Directors

Upper Layer NBFCs are required to report to the RBI if an independent director is removed or resigns before completing the normal tenure, along with the relevant reasons and supporting details, wherever applicable.

1. Registration with Credit Information Companies

Every company holding an NBFC licence from the RBI must register with all applicable Credit Information Companies. Registration is generally completed before the first loan disbursement or commencement of financing operations. Thereafter, loan book data must be reported periodically within the applicable timeline.

2. CKYC Registration

Every RBI-licensed NBFC must complete entity registration with the Central KYC Registry and create CKYC records for new borrowers within the prescribed timeline from loan disbursement or onboarding, wherever applicable.

3. FIU-IND Registration

Every RBI-licensed NBFC must register with the Financial Intelligence Unit - India and comply with reporting obligations relating to cash transactions, suspicious transactions and other prescribed events under the applicable AML framework.

4. NeSL Registration

NBFCs may be required to complete entity registration with the information utility and upload relevant financial information or charge-related records within the applicable timeline from charge creation or transaction documentation.

5. CERSAI Registration

NBFCs must complete registration and filing requirements relating to securitisation transactions, asset reconstruction, and creation or modification of security interest over property, as contemplated under the SARFAESI Act, 2002.

1. Leverage Ratio

Applicable NBFCs, except certain categories such as NBFC-IFCs and NBFC-MFIs, are required to maintain leverage within the prescribed regulatory limit. The leverage ratio should be monitored on an ongoing basis as per applicable RBI directions.

2. Accounting of Investments

The Board of Directors of an NBFC should frame and implement a clear investment policy covering investment classification, valuation, accounting treatment and criteria for categorising investments as current or long-term.

3. Policy for Demand or Call Loans

Applicable NBFCs proposing to grant demand or call loans should adopt a Board-approved policy defining loan terms, repayment conditions, monitoring mechanism, interest treatment and recovery process.

4. Provisioning for Non-Performing Assets

NBFCs are required to classify assets into standard, sub-standard, doubtful and loss assets. They must maintain provisioning for standard assets and additional provisioning for NPAs as per applicable prudential norms and RBI directions.

5. Multiple NBFCs in the Same Group

Where multiple NBFCs operate within the same group, their assets may need to be aggregated for determining applicable asset-size thresholds, including the Rs. 1,000 crore threshold, wherever applicable.

6. Balance Sheet Disclosures

Every NBFC must make appropriate disclosures in its financial statements, including provisions for doubtful or bad debts, depreciation in investments and other regulatory disclosures required under applicable norms.

1. Provisioning for Standard Assets

Provisioning for standard assets may be required at 0.25% for NBFCs with asset size below Rs. 500 crore and 0.40% of the outstanding principal amount in other cases, subject to the applicable RBI prudential norms.

2. Provisioning for Sub-Standard Assets

For assets classified as sub-standard, NBFCs must assess credit weakness, expected recoverability and impairment in accordance with applicable accounting standards and RBI directions.

• Secured exposure - 15%
• Unsecured exposure - 25%
• Unsecured exposure in respect of infrastructure loans - 20%

3. Provisioning for Doubtful Assets

Assets that remain overdue beyond the prescribed period may be classified as doubtful assets. Provisioning depends on the secured and unsecured portions of the exposure and the period for which the asset remains doubtful.

• Doubtful up to one year - 100% on unsecured portion and 25% on the realisable value of security.
• Doubtful for one to three years - 100% on unsecured portion and 40% on the secured portion, subject to applicable asset classification norms.
• Doubtful for more than three years - 100% provisioning or write-off, as applicable.

4. Provisioning for Loss Assets

Where an asset is identified as a loss asset, the entire exposure may be required to be written off or fully provided for, depending on applicable prudential norms and management assessment.

1. Change in Management

Any change in the management of an NBFC resulting in a change of more than 30% of directors, excluding independent directors, may require prior compliance with applicable RBI approval or intimation requirements.

2. Change in Shareholding or Ownership

Any change in ownership or shareholding of an NBFC resulting in acquisition or transfer of 26% or more of the paid-up equity capital may require prior approval from the RBI, subject to applicable exemptions and regulatory conditions.

3. Shifting of Registered Office

Where an NBFC proposes to shift its registered office, it may be required to obtain a No Objection Certificate from the RBI before completing the necessary filings and procedural formalities under the Companies Act, 2013.

4. Change in Name or Object Clause

Any proposed change in the name of the NBFC or alteration of its object clause generally requires prior approval from the concerned regional office of the RBI before proceeding with corporate filings.