Athira Sethu
Kochi, 13 April 2026
Government-owned non-banking financial companies (NBFCs) such as Power Finance Corporation (PFC), REC, Indian Railway Finance Corporation (IRFC), and HUDCO are on investors’ radar as the possibility of being categorized as “upper-layer” NBFCs by the Reserve Bank of India (RBI) under its proposed norms.
This comes from the proposed amendments that would be introduced by the Reserve Bank of India (RBI). The previous categorization process involved a cumbersome mechanism, while the new amendment proposal makes the process easy and straightforward. The criteria to be met by NBFCs to be considered “upper-layer” is any NBFC that possesses assets above ₹1 lakh crore and includes government-owned NBFCs that were earlier categorized into different layers.
The amendment proposal is available in the document titled “Reserve Bank of India (Non-Banking Financial Companies’ Registration, Exemptions and Framework for Scale-Based Regulation) Second Amendment Directions, 2026.” The draft explains that the proposal would involve an easy, transparent, and equitable methodology of classification, making the criteria for selection clear and unambiguous.
This move comes amidst a situation where Tata Sons is being monitored by everyone. Tata Sons is an investment group with assets worth ₹1.75 lakh crore as of March 2025. Several government-owned NBFCs that have been considered large in size earlier have been excluded from the upper-layer category so far, despite the RBI’s deadline set for October 2025.
The guidelines further state that all upper-layer NBFCs may use guarantees provided by the state governments to mitigate credit risks without setting any limits as long as they fulfill some conditions.
Recently, the RBI Governor Sanjay Malhotra declared that the central bank will roll out a new framework for the NBFCs, including those under government ownership such as Tata Sons.
What is an Upper-Layer NBFC?
An upper-layer NBFC is a large and significant NBFC in India. Due to its significance, the RBI monitors such NBFCs and provides them with stricter guidelines similar to banks. For instance, some examples of upper-layer NBFCs include Bajaj Finance, Shriram Finance, and L&T Finance.
To put it simply, an upper-layer NBFC is a large and significant NBFC that may have a substantial impact on the financial system should anything happen to them. That is why the RBI requires such NBFCs to be stable and secure.
