The Reserve Bank of India (RBI) may tighten supervisory norms for non-banking finance companies (NBFCs) in FY26, especially for base layer NBFCs, experts say.
Such NBFCs could be asked to file more frequent return reports (as against once or twice a year currently by base layer players), and the regulator may introduce stricter norms on business growth, quality of underwriting, appointment of chief risk officer, and higher customer service, compliance and corporate governance standards, they say.
“There could be a case for enhanced supervision. This could include more frequent reporting as against the current provision of filing returns only once or twice a year by base layer NBFCs,” said Raman Aggarwal, CEO at FIDC, an industry body for NBFCs. As on December 2024, there are over 8,700 base-layer NBFCs out of the total universe of 9,291 NBFCs in India.
More frequent data reporting, stricter norms on business growth, underwriting, appointment of CRO, and higher customer service, compliance and corporate governance standards on the cards
“Already all NBFCs with asset base of ₹5,000 crore and above (that covers all upper layer and some middle layer NBFCs) are supposed to undergo risk-based internal audits (RBIA). Perhaps these NBFCs may be subject to additional supervision based on the analysis or outcome of RBIA,” Aggarwal said.
Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat, said the supervisory framework for base layer NBFCs would be focused more towards business growth, quality of underwriting, and specific focus on customer service with some basic criteria being put in place for the assurance functions from a governance perspective. The RBI did not respond to BL queries till press time.
Mid, upper layer NBFCs may be subject to additional supervision based on the analysis or outcome of RBIA.
According to Karthik Srinivasan, senior vice president, financial sector ratings at ICRA, currently the scope and the frequency of supervisory oversight of base layer NBFCs (entities with assets less than ₹1,000 crore) is lower relative to their middle and upper layer peers. Some entities in the base layer, depending on their business models, target exposures and lending rates may witness increased oversight in line with RBI agenda to move to a risk-based supervision.
The regulator over last few years has increased access to data from regulated entities to assess and estimate any early warning trends. The move to risk based assessment is a step towards formalising this via a framework and categorisation, which would require entities in the higher risk category to engage more with the regulator on the emerging business and credit trends.
As on December 2024, there are over 8,700 base-layer NBFCs out of the total universe of 9,291 NBFCs in India.
“Further, as borrower protection is a key priority for the regulator, we can expect entities serving the relatively high risk borrowers (consequently, high lending rates), entities having a high portfolio churn and entities with higher level of frauds, customer complaints to witness increased scrutiny,” Srinivasan said. To be sure, the RBI in its FY25 annual report had mentioned that it may enhance the existing framework for supervision of base layer NBFCs. ENDS
Published on July 6, 2025