The Reserve Bank of India (RBI) on October 11, 2022, issued a notification on Multiple NBFCs in a Group: Classification in Middle Layer.
Referring to the four-layered regulatory structure for Non-Banking Financial Companies NBFCs under the Scale Based Regulatory Framework in paragraph 1 of the Annex to the Circular on "Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs" published on October 22, 2021.
The applicable NBFCs that are a part of a common Group or were floated by a common set of promoters shall not be viewed on a standalone basis, according to paragraph 16 of the Master Direction - Non-Banking Financial Company-Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions 2016. The total assets of all NBFCs in the Group must be consolidated in accordance with the current policy on NBFC asset consolidation in order to establish the cut-off point for their classification in the Middle Layer.
The following points need to be considered-
- 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, as a result, the regulations as applicable to the Middle Layer shall be applicable to them.
- If the consolidated asset size of the Group is at least 1000 crore, then the regulations as applicable to the Middle Layer shall.
- All NBFCs in the Group must have their statutory auditors confirm the asset size as of March 31 each year. The certificate must be given to the Reserve Bank's Department of Supervision, whose purview the NBFCs fall under.
- From October 1, 2022, these rules will be in effect.
- The provisions in this circular won't be applicable if an NBFC is categorized in the Upper Layer.
[Notification No. RBI/2022-23/129]
