TITLE: India's Reserve Bank Issues Second Amendment Directions for Non-Banking Financial Companies Scale Based Regulation
BODY:
On June 24, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Second Amendment Directions, 2026. The amendment modifies the regulatory framework for non-banking financial companies (NBFCs) established under the original Directions dated November 28, 2025.
The amendment refines the methodology for identifying NBFCs in the Upper Layer and clarifies the placement of government-owned NBFCs within the Scale Based Regulatory Framework. Key changes include: the Upper Layer now comprises NBFCs specifically identified annually by the RBI based on enhanced regulatory requirements; the asset size threshold for Upper Layer identification is set at ₹1,00,000 crore and above as per the latest audited balance sheet; and the criteria for Upper Layer identification will be reviewed every three years. The amendment also introduces new guidelines for NBFC group entities of Scheduled Commercial Banks, requiring them to adhere to applicable provisions under the Reserve Bank of India (Commercial Banks – Undertaking of financial services) Directions, 2025, regardless of their layer-wise classification. This ensures consistency where both an NBFC and its parent bank undertake the same business or activity.
The amendment came into force with effect from the date of issuance. The RBI exercised these powers under sections 45JA, 45K, 45L and 45M of the Reserve Bank of India Act, 1934, section 3 read with section 31A and section 6 of the Factoring Regulation Act, 2011, and sections 30, 30A, 32 and 33 of the National Housing Bank Act, 1987. These changes apply to all NBFCs operating under the Scale Based Regulatory Framework.