The review comes as Non-Banking Financial Companies (NBFCs) play a growing role in lending (~15% of GDP), amid concerns over their interconnectedness with banks, rising unsecured loans, and potential systemic risks.

About SBR Framework for NBFCs: Implemented by RBI from 2022, it categorizes NBFCs into four distinct layers based on their systemic importance, size and perceived level of risk.

• Base Layer (NBFC-BL): Consists of non-deposit taking NBFCs with assets below ₹1,000 crore.
  • Includes specific entities like Peer-to-Peer (P2P) lending platforms, Account Aggregators (AA), Non-Operative Financial Holding Company.
  • It has a share of 5.2% of total NBFC assets.
• Middle Layer (NBFC-ML): Includes all deposit-taking NBFCs (NBFC-D) regardless of asset size and non-deposit-taking NBFCs with assets of ₹1,000 crore and above.
  • It accounted for the largest share of 64.6% of total NBFC assets.
• Upper Layer (NBFC-UL): Comprises NBFCs specifically identified by the RBI as warranting enhanced regulatory oversight based on a set of parameters and scoring methodology.
  • It has a share of 30.2% in total NBFC assets.
• Top Layer: NBFCs judged to be extreme in supervisory risk perception would be pushed to the Top. There will be enhanced and more intensive supervisory engagement with these NBFCs.
  • Ideally it remains empty.