RBI proposes asset-based criteria for PSU inclusion in upper layer NBFC

The Reserve Bank of India on Friday proposed an overhaul of the framework for identifying upper-layer non-banking finance companies (NBFCs), suggesting a shift to an asset-size-based criterion and inclusion of government-owned entities, PTI reported.Under the draft ‘Reserve Bank of India (Non-Banking Financial Companies' Registration, Exemptions and Framework for Scale Based Regulation) Second Amendment Directions, 2026’, NBFCs with assets of over Rs 1 lakh crore will qualify for the upper layer (NBFC-UL)."With a view to adopt a transparent, simple and absolute criteria for identification of NBFC-UL, it is proposed to replace the existing methodology with asset size criteria, which is currently proposed as Rs 1,00,000 crore and above," the draft released on the RBI website said.The proposal comes amid ongoing discussions around the listing of Tata Sons, which is part of the upper-layer NBFCs but has not listed despite the October 2025 deadline. The company had an asset base of Rs 1.75 lakh crore as of March 2025.As per existing norms, the top-15 NBFCs in the upper layer are required to list.The draft also proposes including government-owned NBFCs in the upper layer, which are currently placed in the base or middle layers."The scale-based regulation framework currently places government-owned NBFCs in the base layer or middle layer and not in the UL. In pursuance of the principle of ownership neutral regulatory regime for NBFCs, it is now proposed to consider eligible government-owned NBFCs also for inclusion in the list of NBFC-UL based on the revised criteria," the RBI said.Additionally, the central bank has proposed allowing all NBFC-UL entities to use state government guarantees as a credit risk transfer instrument without any limit, subject to specified conditions.Governor Sanjay Malhotra had earlier indicated that the RBI would introduce a revised framework for NBFCs while responding to queries on Tata Sons’ compliance with existing norms.