Scale-Based Regulation of NBFCs: Four Layers Explained
Why in the news
A refreshed Upper Layer roster is likely by mid-2026.
Key facts
- SBR is a risk-based structure for NBFC regulation.
- Upper Layer entries are chosen by a scoring method: size, interconnectedness, complexity.
| Layer | Members | Rules |
|---|---|---|
| Base (NBFC-BL) | Non-systemic NBFCs | Lowest; basic norms |
| Middle (NBFC-ML) | All deposit-takers and larger non-deposit NBFCs | Better governance and disclosure |
| Upper (NBFC-UL) | Systemically significant NBFCs | Bank-like capital, leverage, governance |
| Top (NBFC-TL) | Extreme systemic risk | Very stringent supervision |
Objectives
- Risk-matched rules, financial stability, better governance.
- Less regulatory arbitrage between banks and NBFCs.
Exam angle
- Four layers; PCA applies; higher layers face stricter capital norms.