RBI Cancels Registration of 135 NBFCs: Key Notes
Why in the news
The Reserve Bank pruned the NBFC sector by withdrawing the operating licences of 135 companies. It is part of ongoing supervisory clean-up work.
Key facts
- Action: cancellation of the Certificate of Registration (CoR) of 135 NBFCs.
- Names mentioned: Citiwide Financial Services, Essel Finance Business Loans, Jupiter Finvest, Jupiter Projects, Times Finance, Akshay Fiscal Services and Express Fincap House.
- Location: most were registered in West Bengal.
- Separate item: 13 NBFCs gave up their CoRs voluntarily, having exited the business, merged, dissolved or been struck off.
About NBFCs and the CoR
- An NBFC is a company that lends, trades in shares and bonds, or does leasing, hire-purchase, insurance or chit business, but holds no banking licence.
- So it cannot take demand deposits, issue cheques, or join the payment and settlement system.
- The CoR is the RBI permit needed to operate; it can be cancelled for weak capital, rule violations, inactivity or fraudulent and unfair practices.
Why RBI cancels registrations
- Remove inactive or non-compliant firms and strengthen financial stability.
- Shield customers from fraudulent or unregulated lending and shrink the grey market.
- Raise the credibility of the regulated NBFC sector.
| SBR layer | Who falls in it |
|---|---|
| Base Layer (NBFC-BL) | Non-deposit NBFCs with assets under ₹1,000 crore; P2P platforms, Account Aggregators, NOFHCs |
| Middle Layer (NBFC-ML) | Every deposit taker, plus non-deposit firms holding ₹1,000 crore or more; also HFCs, IFCs, IDFs, CICs and SPDs |
| Upper Layer (NBFC-UL) | Roughly the 25-30 biggest NBFCs, ranked on size, complexity and links with others; tighter, bank-like rules |
| Top Layer (NBFC-TL) | Empty at present; meant for NBFCs posing extreme systemic risk |
Activity-based types
- AFC, Loan Company, Investment Company, IFC, IDF, CIC, NBFC-MFI, NBFC-Factor, NBFC-AA, NBFC-P2P, HFC (under RBI since 2019), MGC and Standalone Primary Dealers.
Exam angle
- Regulator of NBFCs: RBI (RBI Act, 1934).
- Number of SBR layers: four; the Top Layer is empty.
- Full form of CoR and SBR.