RBI Releases List of Non-Banking Financial Companies (NBFCs) in the Upper Layer (NBFC-UL) for 2024-25

 RBI Releases List of Non-Banking Financial Companies (NBFCs) in the Upper Layer (NBFC-UL) for 2024-25

The Reserve Bank of India (RBI) has published the list of Non-Banking Financial Companies (NBFCs) categorized under the Upper Layer (NBFC-UL) for the year 2024-25. This list includes entities such as LIC Housing Finance Limited, PNB Housing Finance Limited, Shriram Finance Limited, among others. The classification is in line with the Scale-Based Regulation (SBR), a regulatory framework for NBFCs.

Once an NBFC is classified as part of the NBFC-UL, it is subject to stricter regulatory requirements for a minimum of five years. The SBR framework aims to reduce systemic risks, apply proportionality in regulation, and enhance the quality and risk management practices of NBFCs.

Overview of Non-Banking Financial Companies (NBFCs):

• Registration: NBFCs are registered under the Companies Act, 1956.
• Primary Objective: They engage in lending activities but do not include institutions mainly involved in agriculture, industrial activities, trading goods (excluding securities), or dealing with immovable property.
• Key Differences from Banks:
  • NBFCs cannot accept demand deposits (they only accept term deposits).
  • They are not part of the payment and settlement systems.
  • NBFCs cannot issue cheques drawn on themselves.
  • Depositors of NBFCs do not have deposit insurance coverage.

NBFC Classification Under SBR:

• Upper Layer (NBFC-UL):
  • NBFCs with significant systemic importance, subject to enhanced regulations.
  • Includes entities like LIC Housing Finance, PNB Housing Finance, and Shriram Finance.
• Middle Layer (NBFC-ML):
  • Includes large NBFCs not as systemically important as those in the upper layer.
• Base Layer (NBFC-BL):
  • NBFCs with smaller asset sizes.
• Top Layer (NBFC-TL):
  • Includes high-risk NBFCs identified by RBI based on specific criteria.

The SBR framework ensures that NBFCs are regulated in proportion to their size and systemic risk, strengthening the overall financial system.

Tags : UPSC 2025 current affairs preparation, UPSC current affairs January 2025, UPSC 2025 daily current affairs, Best sources for UPSC current affairs 2025, UPSC 2025 current affairs for prelims, UPSC 2025 current affairs for mains, Important current affairs for UPSC 2025, UPSC current affairs strategy 2025, UPSC 2025 current affairs notes, UPSC current affairs PDF 2025, Current affairs for UPSC 2025 preparation, UPSC 2025 current affairs online classes, UPSC current affairs quiz 2025, How to study current affairs for UPSC 2025, UPSC 2025 current affairs magazines, Current affairs for UPSC 2025 prelims and mains, Current affairs updates for UPSC 2025, UPSC 2025 current affairs analysis, Current affairs for UPSC 2025 PDF download, UPSC 2025 current affairs important topics,