Scale-Based Regulation (SBR) is RBI's post-IL&FS redesign. It took effect in October 2022 and is now consolidated in the Master Direction — RBI (Non-Banking Financial Company — Scale Based Regulation) Directions, 2023. Treat it as your permanent primary source and verify details there. It has four layers, with regulation tightening as the systemic footprint grows:
What are the four NBFC layers?
| Layer | Who | The regulatory deal |
|---|---|---|
| Base (NBFC-BL) | Non-deposit-taking, assets < ₹1,000 cr; plus P2P platforms, account aggregators, NOFHCs | Lightest touch: registration, conduct rules, a simple leverage cap (outside liabilities ≤ 7× owned funds) for most, rather than the full CRAR regime |
| Middle (NBFC-ML) | All deposit-takers; non-deposit-takers ≥ ₹1,000 cr; and regardless of size: HFCs, IFCs, CICs, standalone primary dealers, IDFs | CRAR 15% (Tier 1 ≥ 10%), 90-dpd NPA norm, ALM framework with bucket caps, LCR, concentration limits, board-governance norms |
| Upper (NBFC-UL) | Top 10 NBFCs by assets (always), plus others RBI scores in by size/interconnectedness | Bank-like add-ons: CET1 ≥ 9%, differential standard-asset provisioning, large-exposure framework, mandatory listing within 3 years of designation |
| Top (NBFC-TL) | Empty by design | Populated only if RBI judges an upper-layer NBFC's risk extreme; bank-equivalent supervision |
These layers encode two things. One is the regulator's admission that "NBFC" spans everything from a two-branch vehicle financier to Bajaj Finance. The other is its post-2018 conviction that the biggest ones are banks in everything but funding, and must hold capital and liquidity like banks.
Advertisement
What changed in NBFC regulation after 2018?
Housing finance companies were the National Housing Bank's wards until the IL&FS aftermath exposed how awkward it is for a refinance provider to regulate its own borrowers. The Finance Act 2019 moved regulation to RBI in August 2019, and NHB stayed on as refinancer and inspector. The 2020 HFC framework brought them toward NBFC rules. It set CRAR at 15% (phased to March 2022) and a principal-business test of ≥60% of net assets in housing finance, at least half of that to individuals (phased). It also applied the same ALM/LCR framework. In 2024 deposit-taking HFCs had their deposit ceiling cut to 1.5× net owned funds. For your analysis, treat HFCs as NBFCs whose asset class has historically justified higher gearing, and then audit that justification (KPI 7).
The post-2018 hardening, in one list. Each item answers a specific failure you'll meet in the failure anatomy.
- The liquidity framework with granular buckets, the 10/10/20 caps and LCR. It answers DHFL's rollover faith.
- SBR's upper-layer regime and CET1 floor, the answer to an IL&FS that was "too big to be this lightly watched".
- RBI's power to supersede NBFC boards and drive resolution through IBC, via Section 45-IE. It was inserted in 2019 and used first on DHFL that November, then on Srei and Reliance Capital. It answers the lack of any orderly way to fail.
- Harmonized 90-dpd NPA recognition with day-end stamping (2021).
- The November 2023 risk-weight increase on unsecured consumer credit, to 125% for banks and NBFCs, plus higher weights on bank lending to NBFCs. Here the regulator was leaning against the very pipeline, from banks through NBFCs into unsecured retail, that was reflating. It was partially rolled back in 2025 as growth cooled, so verify current weights. Remember the method, though: RBI now actively modulates this channel.
How does the US regulate non-bank lenders?
The US contrast, for your parallel column. America has no RBI-equivalent registry for finance companies. A non-bank consumer lender (OneMain, the pre-2008 GE Capital, Countrywide) answers to the CFPB for conduct, the SEC for disclosure, state regulators for licensing, and nobody for prudential capital or liquidity. In practice the market is the regulator, with all the subtlety and patience you'd expect. So the 2008 cohort's survivors solved the funding problem privately. Ally, American Express, Synchrony, Capital One, SoFi all hold bank charters today and fund with insured deposits. The US shadow-lending sector's answer to 2018-India's question was become a bank. India's answer was regulate them like banks. Same lesson, two legal systems.