The Reserve Bank of India (RBI) on April 04, 2024, issued amendments to the Master Direction - Standalone Primary Dealers (Reserve Bank) Directions, 2016.
The following amendments have been stated:
• In provision 2 which states Applicability, provision 2A has been inserted, namely: -
2A. Regulatory Structure under Scale Based Regulation for NBFCs
Regulatory structure for NBFCs shall comprise of four layers based on their size, activity and perceived riskiness. NBFCs in the lowest layer shall be known as NBFCs-Base Layer. NBFCs in Middle Layer and Upper Layer shall be known as NBFCs-Middle Layer and NBFCs-Upper Layer respectively. The Top Layer is ideally expected to be empty and NBFCs in that Layer will be known as NBFCs-Top Layer. SPDs shall always remain in the Middle Layer of the regulatory structure.
• In provision 9 which states Capital Adequacy requirements, provision 9A has been inserted, namely: -
9A. Internal Capital Adequacy Assessment Process (ICAAP)
SPDs are required to make a thorough internal assessment of the need for capital, commensurate with the risks in their business. This internal assessment shall be on similar lines as ICAAP prescribed for commercial banks under Pillar 2 (Master Circular – Basel III Capital Regulations, dated May 12, 2023, as amended from time to time). While Pillar 2 capital will not be insisted upon, SPDs are required to make a realistic assessment of risks. Internal capital assessment shall factor in credit risk, market risk, operational risk and all other residual risks as per methodology to be determined internally. The methodology for internal assessment of capital shall be proportionate to the scale and complexity of operations as per their Board approved policy. The objective of ICAAP is to ensure availability of adequate capital to support all risks in business as also to encourage SPDs to develop and use better internal risk management techniques for monitoring and managing their risks. This will facilitate an active dialogue between the supervisors and SPDs on the assessment of risks and monitoring as well as mitigation of the same.
The following list of circulars have been repealed and are provided in Chapter XI.
[Notification No. RBI/DNBR/2016-17/42 Master Direction DNBR.PD.004/03.10.119/2016-17]
