HUDCO, IRFC, REC, PFC: Govt NBFCs in focus post RBI's proposed changes; all you need to know

The RBI on Friday proposed changes in the criteria for identifying upper-layer NBFCs, pitching for an asset-size-based approach as against the earlier parametric system and inclusion of state-run entities.

As per the draft 'Reserve Bank of India (Non-Banking Financial Companies' Registration, Exemptions and Framework for Scale-Based Regulation) Second Amendment Directions, 2026', upper-layer NBFCs will be those with assets exceeding ₹1 lakh crore.

"With a view to adopting a transparent, simple and absolute criterion for the identification of NBFC-UL, it is proposed to replace the existing methodology with asset size criteria, which is currently proposed as ₹1,00,000 crore and above," the draft put on the RBI website said.

The draft comes at a time when the listing of Tata Sons, the holding company of the salt-to-software conglomerate, is under intense discussion, and all eyes are focused on whether the entity, a core investment company, will receive a reprieve.

As per the RBI mandate, the top-15 entities in the upper layer have to list, and only Tata Sons had not gone for listing even after the October 2025 deadline, despite being featured in the list.

"The scale-based regulation framework currently places government-owned NBFCs in the base layer or middle layer and not in the upper layer (UL). In pursuance of the principle of an ownership-neutral regulatory regime for NBFCs, it is now proposed to consider eligible government-owned NBFCs also for inclusion in the list of NBFC-UL based on the revised criteria," it said.

Tata Sons had an asset base of ₹1.75 lakh crore as of March 2025. A slew of state-run enterprises, which are large enough in size, were excluded from the UL list.

The draft also proposes to allow all NBFC-UL to use state government guarantees as a credit risk transfer instrument without any limit, subject to the specified conditions.

Governor Sanjay Malhotra had, on Wednesday, announced that the Reserve Bank will be coming up with a revised framework on NBFCs when asked about the update on Tata Sons' compliance with the earlier directions.

What are the upper-layer NBFCs in India?

Upper-layer NBFCs (NBFC-UL) are a category of large and systemically important non-banking financial companies identified by the Reserve Bank of India under its Scale-Based Regulation (SBR) framework.

What it means

These are NBFCs that are considered critical to the financial system due to their size, complexity, and interconnectedness. Because of this, they are subject to stricter regulations, similar in some aspects to banks.

Some well-known upper-layer NBFCs include Bajaj Finance, Shriram Finance, and L&T Finance.

In simple terms, upper-layer NBFCs are the “big and important” NBFCs in India that the RBI monitors more closely to ensure stability of the financial system.