RBI Tightens Upper Layer NBFC Norms; Infrastructure Exposure Limits Raised to 45 Percent

The Reserve Bank of India (RBI) has issued updated guidelines for Non-Banking Financial Companies (NBFCs) in the Upper Layer category. The regulator has set the asset threshold for this classification at ₹1,00,000 crore, based on the latest audited balance sheet. This framework aims to enhance oversight of systemically important entities to prevent financial shocks.

While the RBI has tightened regulations regarding concentration risk—rejecting calls for special exposure exemptions for government-owned NBFCs—it has provided relief to the infrastructure sector. The large exposure limit for Infrastructure Finance Companies (IFCs) within the Upper Layer has been increased to 45 per cent from 35 per cent of their eligible capital base, aiming to prevent project stalling. The classification of entities like Tata Sons remains a subject of market speculation as listing pressure persists for entities recognised as NBFC-UL.

The updated classification criteria will be reviewed every three years. Government-owned NBFCs are now officially included in the Upper Layer category, reinforcing an ownership-neutral regulatory approach, although they are exempt from the mandatory listing requirements imposed on private entities that must list within three years of recognition.