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27 October 2023
RBI issues Master Direction (Non-Banking Company – Scale Based Regulation)
Directions, 2023
In brief
The Reserve Bank of India (RBI) issued the much-awaited Master Direction – Reserve Bank of India (Non-
Banking Financial Company – Scale Based Regulation) Directions, 2023 (MD) on 19 October 2023. The MD has
been issued in supersession of the existing Master Directions Systemically Important and Non-Systemically
Important NBFCs.
RBI has followed a streamlined approach by consolidating the provisions of the Master Directions applicable to
Systemically and Non-Systemically important NBFCs, certain provisions of the Scale Based Regulatory
Framework for NBFCs and the related circulars released by the RBI periodically, into one single Master Direction.
All the NBFCs, except the expressly exempt ones, shall be governed by this MD.
RBI has established a layered approach with incremental obligations being assigned to each layer, as the NBFC
progresses based on its asset size, scale of activity and perceived riskiness. For ease of reference, the MD is
divided into sections applicable for different categories of NBFCs, viz. NBFC-Base Layer, NBFC-Middle Layer,
NBFC-Upper Layer, etc. depending upon size and function.
The MD has come into force with immediate effect (i.e., 19 October 2023).
In detail
Given below is a brief overview of the key changes made in the MD vis-a-vis the previous Master Directions and
other Circulars:
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Master Direction - Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank)
Directions, 2016 (Updated as on August 29, 2023)
Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2016 (Updated as on August 29, 2023)
Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs and related circulars (Note: certain provisions of the SBR
framework and its circular are not consolidated and continue to apply as directed by RBI)
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i. preference shares other than those which i. Preference shares other than those which
are compulsorily convertible into equity; are compulsorily convertible into equity;
ii. revaluation reserves at discounted rate of ii. Revaluation reserves at discounted rate of
fifty five percent; 55 percent;
iii. General provisions (including that for iii. General provisions (including that for
Standard Assets) and loss reserves to the Standard Assets) and loss reserves to the
extent these are not attributable to actual extent these are not attributable to actual
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iv. hybrid debt capital instruments; iv. Hybrid debt capital instruments;
and to the extent the aggregate does not vi. Perpetual debt instruments issued by a
exceed Tier I capital. non-deposit taking NBFC which is in
excess of what qualifies for Tier 1 capital;
Provision applicable to NBFC-ND-SI asset
size above 500 crore to the extent the aggregate does not exceed
Tier 1 capital.
“Tier II capital” includes the following:
Note – NBFCs-BL are not eligible to include
(a) preference shares other than those which perpetual debt instruments in their Tier 2
are compulsorily convertible into equity; capital.
9. Net Owned Para 3.1 (a) of SBR Framework Section II – Regulations applicable for
Fund NBFCs – BL
Requirements Regulatory minimum Net Owned Fund (NOF)
for NBFC-ICC, NBFC-MFI and NBFC-Factors Para 6: Net Owned Fund Requirement
shall be increased to ₹10 crore. The following
glide path is provided for the existing NBFCs 6.1 In exercise of the powers conferred under
to achieve the NOF of ₹10 crore: clause (b) of sub-section (1) of section 45IA
of the RBI Act,1934 and all the powers
enabling it in that behalf, the Reserve Bank,
hereby specifies ₹10 crore as the Net Owned
Fund (NOF) required for an NBFC-ICC,
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NBFC- ₹10
₹2 crore ₹5 crore
However, for NBFC-P2P, NBFC-AA, and ICC crore
NBFCs with no public funds and no customer
interface, the NOF shall continue to be ₹2
crore. It is clarified that there is no change in ₹5 crore ₹7 crore
the existing regulatory minimum NOF for NBFC- (₹2 crore (₹5 crore ₹10
NBFCs - IDF, IFC, MGCs, HFC, and SPD. MFI in NE in NE crore
Region) Region)
NBFC- ₹10
₹5 crore ₹7 crore
Factors crore
10. Investment While arriving at the NOF figure, investment Section II – Regulations applicable for
through made by an applicable NBFC in entities of the NBFCs – BL
Alternative same group concerns shall be treated alike,
Investment whether the investment is made directly or Para 7: In terms of section 45IA of the RBI
Funds - through an Alternative Investment Fund (AIF)/ Act, 1934, the investments/loans/exposures
Calculation of Venture Capital Fund (VCF), and when the to the subsidiaries, companies in the same
NOF of an funds in the VCF have come from the group and other NBFCs, in excess of 10 per
NBFC applicable NBFC to the extent of 50per cent cent of aggregate of the paid-up equity capital
or more; or where the beneficial owner, in the and free reserves are deducted to arrive at
case of Trusts is the applicable NBFC, if 50 NOF. In the context of arriving at the NOF
per cent of the funds in the Trusts are from figure, investment made by the NBFC in
the concerned applicable NBFC. For this entities of the same group, either directly or
purpose, "beneficial ownership" shall mean indirectly, through an Alternative Investment
holding the power to make or influence Fund (AIF), shall be treated alike, provided
decisions in the Trust and being the recipient the funds in the AIF (in company form) have
of benefits arising out of the activities of the come from NBFC to the extent of 50 per cent
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Trust. In arriving at the NOF, the substance or more; or where the beneficial owner in the
would take precedence over form. case of AIF (in trust form) is the NBFC and 50
per cent of the funds in the trust have come
from the NBFC. For this purpose, "beneficial
ownership" shall mean holding the power to
make or influence decisions in the trust and
being the recipient of benefits arising out of
the activities of the trust. In arriving at the
NOF, the substance would take precedence
over form.
11. Leverage ratio Applicable only to the NBFC-ND-NSI Section II – Regulations applicable for
and Tier 1 (asset size below 500 crore): NBFCs – BL asset size upto 1000 crore
Capital
The leverage ratio of an applicable NBFC Para 9.1
(except NBFC-MFIs and NBFC-IFCs) shall
not be more than 7 at any point of time, with Leverage Ratio- The leverage ratio of
effect from March 31, 2015. NBFCs (except NBFC-MFIs, NBFCs-ML and
above) shall not be more than seven at any
In respect of NBFCs primarily engaged in point of time.
lending against gold jewellery (such loans
comprising 50 percent of more of their Note: Leverage ratio means the total Outside
financial assets) they shall maintain a Liabilities divided by Owned Fund.
minimum Tier I capital of 12 per cent.
Para 9.2
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13. Asset The asset classification norms as given below Section II – Regulations applicable for
Classification shall apply to every applicable NBFC (except NBFCs – BL
NBFC-MFIs).
Para 14
Provision applicable to NBFC-ND-SI asset (i) an asset which has been classified as non-
size above 500 crore performing asset for a period not exceeding
18 months;…………
Sub-standrad Asset - (a) an asset which has
been classified as non-performing asset for a Section III – Regulations applicable for
period not exceeding 12 months………. NBFCs – ML (asset size 1000 crore and
above)
Para 87-
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15. Doubtful asset Provisions applicable to NBFC-ND-NSI Section II – Regulations applicable for
asset size below 500 crore NBFCs – BL (asset size upto 1000 crore)
Para 87-
16. Non- (v) Non-Performing Asset (referred to in these Section II – Regulations applicable for
Performing Directions as “NPA”) shall mean: (NBFC-ND- NBFCs – BL asset size upto 1000 crore
Asset NSI asset size below 500 crore)
Para 14.3
a) an asset, in respect of which, interest has
remained overdue for a period of six months “Non-Performing Asset” (NPA) for applicable
or more; NBFCs shall mean:
b) a term loan inclusive of unpaid interest, (i) an asset, in respect of which, interest has
when the instalment is overdue for a period of remained overdue for a period of more than
six months or more or on which interest 180 days.
amount remained overdue for a period of six
months or more; (ii) a term loan inclusive of unpaid interest,
when the instalment is overdue for a period of
more than 180 days or on which interest
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c) a demand or call loan, which remained amount remained overdue for a period of
overdue for a period of six months or more more than 180 days.
from the date of demand or call or on which
interest amount remained overdue for a (iii) a demand or call loan, which remained
period of six months or more; overdue for a period of more than 180 days
from the date of demand or call or on which
d) a bill which remains overdue for a period of interest amount remained overdue for a
six months or more; period of more than 180 days.
e) the interest in respect of a debt or the (iv) a bill which remains overdue for a period
income on receivables under the head 'other of more than 180 days.
current assets' in the nature of short term
loans / advances, which facility remained (v) the interest in respect of a debt or the
overdue for a period of six months or more; income on receivables under the head 'other
current assets' in the nature of short-term
f) any dues on account of sale of assets or loans/advances, which facility remained
services rendered or reimbursement of overdue for a period of more than 180 days
expenses incurred, which remained overdue
for a period of six months or more; (vi) any dues on account of sale of assets or
services rendered or reimbursement of
g) the lease rental and hire purchase expenses incurred, which remained overdue
instalment, which has become overdue for a for a period of more than 180 days.
period of twelve months or more;
(vii) the lease rental and hire purchase
h) in respect of loans, advances and other instalment, which has become overdue for a
credit facilities (including bills purchased and period of more than 180 days.
discounted), the balance outstanding under
the credit facilities (including accrued interest) (viii) in respect of loans, advances and other
made available to the same borrower / credit facilities (including bills purchased and
beneficiary when any of the above credit discounted), the balance outstanding under
facilities becomes non-performing asset; the credit facilities (including accrued interest)
made available to the same borrower/
Provided that in the case of lease and hire beneficiary when any of the above credit
purchase transactions, an applicable NBFC facilities becomes non-performing asset.
shall classify each such account on the basis
of its record of recovery. Provided that in the case of lease and hire
purchase transactions, an applicable NBFC
shall classify each such account on the basis
of its record of recovery.
17. Non- Applicable to NBFC-ND-NSI asset size Section II – Regulations applicable for
Performing below 500 crore NBFCs – BL asset size upto 1000 crore
Asset (SMA
Classification) Every NBFC shall recognise incipient stress Para 14.4.2
in loan accounts, immediately on default, by
classifying such assets as special mention Every NBFC shall recognise incipient stress
accounts (SMA) as per the following in loan accounts, immediately on default, by
categories: classifying such assets as special mention
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18. Provisioning The provisioning requirements as given Section II – Regulations applicable for
Requirements below shall apply to every applicable NBFC NBFCs – BL
(except NBFC-MFIs)
Para 15
20. Non- Provisions applicable to all the NBFCs Section II – Regulations applicable for
Cooperative irrespective of their asset size. NBFCs – BL
Borrowers
All Notified NBFCs shall identify "non-co- Para 21
operative borrowers".
All NBFC-Factors, NBFCs-D and non-deposit
taking NBFCs of asset size of ₹500 crore and
above (Notified NBFCs) shall identify "non-
cooperative borrowers"
21. Early Framework for Revitalizing Distressed Assets Section II – Regulations applicable for
Recognition of in the Economy (Framework) as provided for NBFCs – BL
Financial in Annex XVIII shall apply to all NBFC-
Distress, Factors. Para 25 -Framework for Revitalizing
Prompt Steps Distressed Assets in the Economy
for Resolution (Framework) as provided in Annex IV shall
and Fair apply to non-deposit taking NBFCs with asset
Recovery for size less than ₹500 crore.
Lenders:
Framework for
Revitalizing
Distressed
Assets in the
Economy
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(ii) make investment in the equity/ debt capital (iii) invest in equity instruments of other
instruments in any of the financial entities NOFHCs.
under the NOFHC;
Explanation: For the purposes of this
(iii) invest in equity instruments of other paragraph, the expression, 'Promoter' and
NOFHCs. 'Promoter Group' shall have the meanings
assigned to those expressions in Annex I of
Explanation: For the purposes of this "Guidelines for Licensing of New Banks in the
paragraph, the expression, 'Promoter' and Private Sector" dated February 22, 2013,
'Promoter Group' shall have the meanings issued by the Reserve Bank.
assigned to those expressions in the
"Guidelines for Licensing of New Banks in the
Private Sector" issued by the Bank - Annex V.
24. Fair Practices NBFCs having customer interface shall adopt Section II – Regulations applicable for
Code the following guidelines: NBFCs – BL
Para 45 -
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25. Appointment of Applicable NBFCs may act as sub-agents Section II – Regulations applicable for
Non-Deposit under MTSS without any prior approval of the NBFCs – BL
Accepting Bank.
NBFCs as sub- Para 62
agents under
Money NBFCs may act as sub-agents under MTSS
Transfer without any prior approval of the Reserve
Service Bank. Deposit accepting NBFCs shall not
Schemes undertake such activity.
(MTSS)
27. Filing of Applicable NBFCs shall file and register the Section II – Regulations applicable for
records of records of equitable mortgages created in NBFCs – BL
mortgages with their favour on or after March 31, 2011 with
the Central the Central Registry of Securitisation Asset Para 68 - NBFCs shall file and register the
Registry Reconstruction and Security Interest of India records of equitable mortgages created in
(CERSAI) and shall also register the records their favour on or after March 31, 2011 with
with the Central Registry as and when the Central Registry of Securitisation Asset
equitable mortgages are created in their Reconstruction and Security Interest of India
favour. Applicable NBFCs shall register all (Central Registry) and shall also register the
types of mortgages with CERSAI. records with the Central Registry as and
when equitable mortgages are created in
their favour. NBFCs shall register all types of
mortgages with Central Registry and adhere
to the provisions contained in the circular
‘Filing of Security Interest relating to
Immovable (other than equitable mortgage),
Movable and Intangible Assets in CERSAI’
dated December 27, 2018, as amended from
time to time.
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28. Migration of Considering the protection available under Section II – Regulations applicable for
Post-Dated section 25 of the Payment and Settlement NBFCs – BL
Cheques Systems Act, 2007 which accords the same
(PDCs)/ rights and remedies to the payee Para 76
Equated (beneficiary) against dishonour of electronic
Monthly funds transfer instructions on grounds of Considering the protection available under
Instalment insufficiency of funds as are available under section 25 of the Payment and Settlement
(EMI) Cheques section 138 of the Negotiable Instruments Systems Act, 2007 which accords the same
to National Act, 1881, there shall be no need for rights and remedies to the payee
Automated applicable NBFCs to take additional cheques, (beneficiary) against dishonour of electronic
Clearing if any, from customers in addition to ECS funds transfer instructions on grounds of
House(NACH)( (Debit) mandates. Cheques complying with insufficiency of funds as are available under
Debit) CTS-2010 standard formats shall alone be section 138 of the Negotiable Instruments
obtained in locations, where the facility of Act, 1881, there shall be no need for NBFCs
ECS/ RECS is not available. to take additional cheques, if any, from
customers in addition to NACH (Debit)
mandates. Accordingly, NBFCs have been
advised not to accept fresh/ additional PDCs
or EMI cheques from their customers.
Cheques complying with CTS-2010 standard
formats alone shall be obtained in locations,
where the facility of NACH is not available.
29. Capital (1) Every applicable NBFC shall maintain a Section III – Regulations applicable for
Requirement minimum capital ratio consisting of Tier I and NBFCs – ML
Tier II capital which shall not be less than 15
per cent of its aggregate risk weighted assets Para 81
on-balance sheet and of risk adjusted value
of off-balance sheet items. 81.1 NBFCs shall maintain a minimum capital
ratio consisting of Tier 1 and Tier 2 capital
(2) The Tier I capital in respect of applicable which shall not be less than 15 percent of its
NBFCs (other than NBFC-MFI), at any point aggregate risk weighted assets on balance
of time, shall not be less than 10 per cent. sheet and of risk adjusted value of off-
balance sheet items.
(3) Applicable NBFCs primarily engaged in
lending against gold jewellery (such loans 81.2 Tier 1 capital in respect of NBFC (except
comprising 50 per cent or more of their NBFC-MFI and NBFC primarily engaged in
financial assets) shall maintain a minimum lending against gold jewellery), at any point of
Tier l capital of 12 per cent. time, shall not be less than 10 percent. i.e. for
NBFCs with such loans comprising 50
percent of more of their financial assets, Tier I
capital shall be minimum of 12% as
prescribed in paragraph 9.2 of these
Directions.
30. Non- Provisions applicable to NBFC-ND-SI Section III – Regulations applicable for
Performing asset size above 500 crore NBFCs – ML asset size 1000 crore and
Asset above
(v) Non-Performing Asset (referred to in these
Directions as “NPA”) shall mean: Para 87.1.5
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(a) an asset, in respect of which, interest has (i) an asset, in respect of which, interest has
remained overdue for a period of three remained overdue for a period of more than
months or more; 90 days.
(b) a term loan inclusive of unpaid interest, (ii) a term loan inclusive of unpaid interest,
when the instalment is overdue for a period of when the instalment is overdue for a period of
three months or more or on which interest more than 90 days or on which interest
amount remained overdue for a period of amount remained overdue for a period of
three months or more; more than 90 days.
(c) a demand or call loan, which remained (iii) a demand or call loan, which remained
overdue for a period of three months or more overdue for a period of more than 90 days
from the date of demand or call or on which from the date of demand or call or on which
interest amount remained overdue for a interest amount remained overdue for a
period of three months or more; period of more than 90 days
(d) a bill which remains overdue for a period (iv) a bill which remains overdue for a period
of three months or more; of more than 90 days.
(e) the interest in respect of a debt or the (v) the interest in respect of a debt or the
income on receivables under the head ‘other income on receivables under the head 'other
current assets’ in the nature of short term current assets' in the nature of short-term
loans/ advances, which facility remained loans/advances, which facility remained
overdue for a period of three months or more; overdue for a period of more than 90 days.
(f) any dues on account of sale of assets or (vi) any dues on account of sale of assets or
services rendered or reimbursement of services rendered or reimbursement of
expenses incurred, which remained overdue expenses incurred, which remained overdue
for a period of three months or more; for a period of more than 90 days.
(g) the lease rental and hire purchase (vii) the lease rental and hire purchase
instalment, which has become overdue for a instalment, which has become overdue for a
period of three months or more; period of more than 90 days.
(h) in respect of loans, advances and other (viii) in respect of loans, advances and other
credit facilities (including bills purchased and credit facilities (including bills purchased and
discounted), the balance outstanding under discounted), the balance outstanding under
the credit facilities (including accrued interest) the credit facilities (including accrued interest)
made available to the same borrower/ made available to the same
beneficiary when any of the above credit borrower/beneficiary when any of the above
facilities becomes non-performing asset: credit facilities becomes non-performing
asset.
Provided that in the case of lease and hire
purchase transactions, an applicable NBFC Provided that in the case of lease and hire
shall classify each such account on the basis purchase transactions, an NBFC shall
of its record of recover classify each such account on the basis of its
record of recovery.
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(a) the shares of another company exceeding (b) forty percent of its Tier 1 capital to a single
fifteen per cent of its owned fund; and group of parties,
(b) the shares of a single group of companies Provided that an NBFC may exceed the
exceeding twenty five per cent of its owned exposure norm specified above, by 5 percent
fund; for any single party and by 10 percent for a
single group of parties, if the additional
(iii) lend and invest (loans/ investments taken exposure is on account of infrastructure loan
together) exceeding and/or investment.
(a) twenty five per cent of its owned fund to a 91.2 NBFC-IFC shall not have exposure
single party; and (credit/investment taken together) exceeding
(b) forty per cent of its owned fund to a single (a) thirty percent of its Tier 1 capital to a
group of parties. single party; and
Provided that the ceiling on the investment in (b) fifty percent of its Tier 1 capital to a single
shares of another company shall not be group of parties.
applicable to an applicable NBFC in respect
of investment in the equity capital of an 91.3 The ceiling on the investment in shares
insurance company up to the extent of another company shall not be applicable to
specifically permitted, in writing, by the Bank. an NBFC in respect of investment in the
equity capital of an insurance company up to
Provided further that an applicable NBFC the extent specifically permitted, in writing, by
may exceed the concentration of the Reserve Bank.
credit/investment norms, by 5 per cent for any
single party and by 10 per cent for a single 91.4 Exposure norms shall not apply to any
group of parties, if the additional exposure is NBFC not accessing public funds in India,
on account of infrastructure loan and/ or either directly or indirectly and not issuing
investment. guarantees.
Provided further that nothing contained in this 91.5 Exposure norms shall not apply to
paragraph shall apply to
(i) investments of NBFC in shares of
(A) investments of applicable NBFCs in
shares of (a) its subsidiaries;
hire-purchase and lease finance) made to, hire purchase and lease finance) made to,
and deposits with,- and deposits with -
i. subsidiaries of the applicable NBFC; and (a) subsidiaries of the NBFC; and
ii. companies in the same group, to the extent (b) companies in the same group, to the
they have been reduced from Owned Funds extent they have been reduced from Owned
for the calculation of NOF. Funds for the calculation of NOF.
Provided that Infrastructure Finance 91.6 NBFC shall formulate a policy in respect
Companies may exceed the concentration of of exposures to a single party/a single group
of parties.
credit norms
91.7 Government NBFCs set up to serve
(A) in lending to: specific sectors may approach the Reserve
i. any single borrower, by ten per cent of its Bank for exemptions, if any.
owned fund; and
Notes:
ii. any single group of borrowers, by fifteen
per cent of its owned fund; 1. For determining the limits, off-balance
sheet exposures shall be converted into
(B) in lending to and investing in, (loans/ credit risk by applying the conversion factors,
investments taken together) as explained in paragraph 85 of these
Directions.
i. a single party, by five percent of its owned
fund; and 2. These ceilings shall be applicable to the
exposure by an NBFC to
ii. a single group of parties, by ten percent of companies/firms/entities in its own group as
its owned fund. well as to the borrowers/investee entity’s
group.
Provided further that the concentration of
credit/ investment norms shall not apply to 3. (i) In case of factoring on "with-recourse"
any applicable NBFC not accessing public basis, the exposure shall be reckoned on the
funds in India, either directly or indirectly and assignor.
not issuing guarantees.
(ii) In case of factoring on "without-recourse"
(2) Every applicable NBFC (other than NBFC- basis, the exposure shall be reckoned on the
D) shall formulate a policy in respect of debtor, irrespective of credit risk cover/
exposures to a single party / a single group of protection provided, except in cases of
parties. international factoring where the entire credit
risk has been assumed by the import factor.
(3) An applicable NBFC which is held by an
NOFHC shall not
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Notes:
SBR Framework
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33. Participation in Non-deposit taking applicable NBFCs with Section IV – Regulations applicable for
Currency asset size of ₹500 crore and above, are NBFCs – ML
Options allowed to participate in the designated
currency options exchanges recognized by Para 101
SEBI, as clients, subject to the Bank’s
(Foreign Exchange Department) guidelines in Non-deposit taking NBFCs are allowed to
the matter, only for the purpose of hedging participate in the designated currency options
their underlying forex exposures. Disclosures exchanges recognized by SEBI, as clients,
shall be made in the balance sheet regarding subject to the guidelines of Foreign Exchange
transactions undertaken, in accordance with Department of the Reserve Bank, only for the
the guidelines issued by SEBI. purpose of hedging their underlying forex
exposures. Disclosures shall be made in the
balance sheet regarding transactions
undertaken, in accordance with the guidelines
issued by SEBI.
34. Ready Non-deposit taking applicable NBFCs with Section IV – Regulations applicable for
Forward asset size of ₹500 crore and above are NBFCs – ML
Contracts in eligible to participate in repo transactions in
Corporate corporate debt securities. They shall comply Para 103
Debt Securities with Repurchase Transactions (Repo)
(Reserve Bank) Directions, 2018 as amended Non-deposit taking NBFCs are eligible to
from time to time. participate in repo transactions in corporate
debt securities. They shall comply with
(a) Capital Adequacy ‘Repurchase Transactions (Repo) (Reserve
Bank) Directions, 2018’ dated July 24, 2018,
Risk weights for credit risk for assets that are as amended from time to time and also
the collateral for such transactions as well as adhere to the following instructions.
risk weights for the counterparty credit risk
shall be as applicable to the issuer/ (i) Capital Adequacy
counterparty under Chapter IV of these
directions. Risk weights for credit risk for assets that are
the collateral for such transactions as well as
(b) Classification of balances in the accounts risk weights for the counterparty credit risk
shall be as applicable to the issuer/
Classification of balances in the various counterparty under paragraphs 84 and 85 of
accounts viz. repo account, reverse repo these Directions.
account etc. shall be done in the relevant
schedules similar to that of banks. (ii) Classification of balances in the accounts
In all other matters related to such repo Classification of balances in the various
transactions, non-deposit taking applicable accounts viz. repo account, reverse repo
NBFCs with asset size of ₹500 crore and account etc. shall be done in the relevant
above, shall follow the Directions and schedules similar to that of banks.
accounting guidelines issued by Internal Debt
Management Department, of the Bank. 103.2 In all other matters related to such repo
transactions, non-deposit taking NBFCs, shall
follow the directions and accounting
guidelines issued by Financial Markets
Regulation Department of the Reserve Bank.
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35. Capital NBFC-MFIs shall maintain a capital adequacy Section VI – Specific Directions applicable
Requirement ratio consisting of Tier I and Tier II Capital for Non-Banking Financial Company –
which shall not be less than 15 percent of its Micro Finance Institutions (NBFC-MFIs)
aggregate risk weighted assets on-balance and Microfinance Loans of other NBFCs
sheet and of risk adjusted value of off-
balance sheet items. The total of Tier II Para 116
Capital at any point of time, shall not exceed
100 percent of Tier I Capital. NBFC-MFIs shall maintain a capital adequacy
ratio consisting of Tier 1 and Tier 2 capital
Note: which shall not be less than 15 percent of its
Explanations:…………………………………… aggregate risk weighted assets of on-balance
sheet and of risk adjusted value of off-
balance sheet items. The total of Tier 2
capital at any point of time, shall not exceed
100 percent of Tier 1 capital. The treatment to
on-balance and off-balance sheet assets for
capital adequacy shall be as provided in
paragraph 84 and 85 of the Directions
respectively. NBFC-MFIs shall also adhere to
provisions in paragraph 86 of the Directions
on treatment of deferred tax assets and
deferred tax liabilities for computation of
capital.
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The takeaways
The MD compiles and consolidates the existing provisions of the Master Directions applicable to the Systemically
Important and Non-Systemically Important NBFCs in one place. Further, the MD brings in the necessary clarity
with respect to the regulatory requirements for different layers of NBFC, specifically for NBFCs with asset size of
more than INR 500 crore falling in the Base Layer.
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PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.
Please see www.pwc.com/structure for further details.
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In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity
Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each
member firm of which is a separate legal entity.
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