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Not All NBFCs Are the Same: Understanding RBI’s Scale-Based Regulation (SBR)

  • 24-Dec-2025
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Not All NBFCs Are the Same: Understanding RBI’s Scale-Based Regulation (SBR)

Many people still think of Non-Banking Financial Companies (NBFCs) as one single category. In reality, not all NBFCs are created equal.

To strengthen financial stability and ensure better risk management, the Reserve Bank of India (RBI) introduced the Scale-Based Regulation (SBR) framework, classifying NBFCs into four distinct layers based on size, risk exposure, and operational complexity.

The simple rule is:The bigger and riskier your NBFC, the stricter the regulations.

Let’s break this down.

RBI’s 4-Layer NBFC Structure Explained

1. Base Layer (BL) – Small & Simple NBFCs

This layer includes the smallest NBFCs with limited operations and lower risk profiles.

Key features:

  • Lightest regulatory burden
  • Basic compliance and governance norms
  • Suitable for niche or early-stage NBFCs

This layer allows flexibility while ensuring minimum regulatory discipline.

2. Middle Layer (ML) – Large & Deposit-Taking NBFCs

This layer covers:

  • Deposit-taking NBFCs
  • Non-deposit-taking NBFCs above a certain asset size

Key features:

  • Higher capital adequacy requirements
  • Enhanced governance standards
  • Stronger risk management and reporting

Most established NBFCs fall into this category.

3. Upper Layer (UL) – Systemically Important NBFCs

These are large, complex, and systemically important NBFCs whose failure could impact the financial system.

Key features:

  • Bank-like regulatory framework
  • Advanced risk management and compliance systems
  • Intensive RBI supervision
  • Higher disclosures and transparency norms

At this stage, NBFCs must invest heavily in technology, governance, and compliance infrastructure.

4. Top Layer (TL) – Exceptional Risk (Currently Empty)

This layer is reserved for NBFCs that pose exceptionally high systemic risk.

  • No NBFCs are currently placed here
  • RBI may move an NBFC into this layer if risk levels sharply increase

Think of it as a regulatory warning zone.

How Moving Up the Scale Impacts Your NBFC

As your NBFC grows and moves up the SBR framework, challenges increase significantly:

  • Higher capital requirements
  • Stricter governance and board oversight
  • Advanced risk monitoring and internal controls
  • Core banking systems and technology investment
  • Increased disclosures and compliance costs
  • Funding restrictions and closer RBI supervision

Growth brings opportunity—but also responsibility.

Why Understanding Your NBFC’s Layer Matters

Knowing where your NBFC stands helps you:

  • Plan capital and funding strategy
  • Prepare for future compliance costs
  • Invest in the right technology and risk systems
  • Avoid regulatory surprises

A clear understanding today can prevent costly corrections tomorrow.

Where Does Your NBFC Stand Today?

Whether you’re a startup NBFC, a growing lender, or a large financial institution, aligning with the SBR framework is no longer optional—it’s critical.

📞 Contact us for a free consultation:
+91 93113 47006

Let’s help you stay compliant, scalable, and future-ready.

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