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RBI Scale-Based Regulation places every NBFC in one of four layers — Base, Middle, Upper, Top — based on size, activity, and systemic interconnectedness. Each layer applies a different capital, governance, and disclosure regime. Asset classification turns NPA at 90 DPD across all layers. Borrower-level tagging discipline is the single source of truth that drives capital, exposure, classification, and disclosure simultaneously.
Tag every loan account at the borrower level with category, product, sanction, tenor, outstanding, DPD, classification stage, provisioning, and connected-party flag. Refresh tagging on every disbursement, prepayment, restructuring, and at day-end. Compute NPA at 90 DPD overdue. Aggregate borrower exposures across products to enforce single-counterparty and group caps. Produce layer-specific reports — capital adequacy, large exposures, concentration, related-party — from this tagged dataset.
SBR layer parameter for the entity (Base, Middle, Upper, Top) driving threshold rules. Borrower master with category, sanction limit, and group code. DPD classification matrix mapped to provisioning percentage. Connected-party register feeding the related-party report.
Daily DPD classification flow into asset-classification register, layer-specific quarterly returns (concentration, large exposure, capital adequacy), audit-ready borrower-level tag history, and synchronised provisioning movements.
The RBI Scale-Based Regulation (SBR) framework, issued in October 2021 and effective from October 2022, restructured the prudential regime for non-banking financial companies. Before SBR, NBFCs operated under a category-driven regime — Asset Finance Company, Loan Company, Investment Company, Infrastructure Finance Company, and so on — each with broadly similar rules. SBR replaced the activity-cut with a size-and-systemic-importance cut. The layer an NBFC sits in now defines almost every prudential parameter that matters: capital, governance, exposure caps, classification, and disclosure. Asset tagging at the borrower level is the operational discipline that keeps all of these in sync.
Quick reference: the four SBR layers
| Layer | Covers | Capital | NPA trigger |
|---|---|---|---|
| Base (NBFC-BL) | Non-deposit-taking, asset size below threshold, lower-complexity | Standard NBFC CRAR | 90 DPD |
| Middle (NBFC-ML) | Deposit-taking, non-deposit above threshold, HFC, IFC, primary dealers | Standard NBFC CRAR with enhanced norms | 90 DPD |
| Upper (NBFC-UL) | RBI-identified on systemic-importance scoring | CET1 minimum 9% of RWA, bank-like LEF | 90 DPD |
| Top (NBFC-TL) | Activated only on extreme risk identification | Bespoke supervisory rules | 90 DPD |
How RBI assigns the layer
For Base and Middle Layer the classification is rule-based — driven by deposit-taking status, asset size threshold, and activity. For Upper Layer it is scoring-based: RBI runs an annual scoring exercise across size, interconnectedness, substitutability, complexity, and supervisory inputs, and publishes the list of identified NBFCs. Once identified, an NBFC remains in the Upper Layer for at least five years; it can move down only if its scoring stays below the threshold for a sustained period and the supervisory view supports a step-down.
The Top Layer is not populated by default. RBI activates it only if an NBFC’s risk profile warrants extreme prudential treatment.
NPA at 90 DPD across all layers
SBR aligned NBFC asset classification with the banking norm. A loan account is NPA when interest or principal remains overdue for more than 90 days from the contractual due date. The earlier 180 DPD treatment that some categories operated under has been withdrawn. The 90 DPD trigger applies uniformly to Base, Middle, and Upper layers from the prescribed cutover dates.
Sub-classification follows the standard ageing matrix:
- Sub-standard: NPA up to 12 months
- Doubtful 1: NPA more than 12 months and up to 24 months
- Doubtful 2: NPA more than 24 months and up to 36 months
- Doubtful 3: NPA more than 36 months
- Loss: identified by management or auditor as uncollectible
Provisioning runs in parallel — secured and unsecured portions of each bucket attract different percentages per the standard NBFC matrix.
Borrower-level asset tagging: the operational anchor
Layer-specific reports — Large Exposure, concentration of advances, related-party transactions, sector exposure, group structure — all roll up from borrower-level data. The tagging discipline that supports these reports must hold every active loan to a borrower-master record with at least:
- Borrower category (individual, MSME, corporate, NBFC, bank, sovereign, others)
- Product type (term loan, working capital, vehicle loan, gold loan, home loan, BNPL, others)
- Original sanction limit, current outstanding, original tenor, residual tenor
- Current DPD bucket and classification stage
- Provisioning held against the account
- Connected-party flag and group code
- Sector code (NIC classification) for sector-exposure reporting
Refresh of the tag must run at every system event — disbursement, prepayment, restructuring, settlement — and at day-end for active accounts. Without daily refresh, the DPD bucket reported by the loan-management system drifts from reality within a week.
Connected-party and related-party tracking
Middle and Upper Layer NBFCs face significant disclosure on related-party transactions. The group code on the borrower master must reflect the full group structure — parent, holding company, sister concerns, key managerial personnel, and their relatives. Loan exposures, deposits accepted, leases, services, and any other dealings with a related party roll up under that group code for the quarterly disclosure to the board and the annual disclosure in financial statements.
A common operational gap: a borrower is added to the loan-management system but the group code is left blank, the related-party report misses the exposure, and the quarterly disclosure is incomplete. Audit will catch this; supervisory inspection will catch it; the remediation involves restating prior disclosures, which is a reportable event.
Try aggregating borrower exposures across products to identify single-counterparty concentration using the framework in the three-way match exception cost calculator — the same aggregation discipline applies.
Layer-specific governance
Middle Layer requires Audit, Risk, Nomination and Remuneration, and Asset-Liability Management committees of the board. A Chief Compliance Officer is mandatory; a Chief Risk Officer is mandatory above the ₹5,000 crore asset threshold. Internal audit must be functional. Fair Practices Code, customer grievance redressal, and information security framework apply with stricter monitoring.
Upper Layer adds: listing on a recognised stock exchange within three years of identification, CET1 minimum at 9% of risk-weighted assets, Differential Standard Asset Provisioning where applicable, Large Exposure Framework caps, ICAAP, and the bank-like supervisory engagement under the Senior Supervisory Manager regime.
Audit evidence required across layers
At each quarter-end the NBFC must produce:
- Borrower-level asset register with classification stage and provisioning
- NPA register with bucket movements during the quarter
- Concentration of advances by borrower, group, and sector
- Related-party transaction register with rolled-up exposures by group code
- Large-exposure report (Middle Layer enhanced, Upper Layer LEF-style)
- Capital adequacy computation aligned to the layer’s CRAR or CET1 norm
This pack is the single most-requested artefact in statutory audit, internal audit, and RBI inspection — and it can only be produced from disciplined borrower-level tagging that has held up across the quarter.
How TransactIG handles SBR reporting
TransactIG configures the SBR layer as an entity-level parameter that drives downstream report shapes — Base, Middle, or Upper. The engine ingests loan-master data, refreshes DPD at day-end, applies the classification matrix, computes provisioning, aggregates exposures by borrower and group code, and produces the quarterly layer-specific reports from the same data lineage. Connected-party flags drive the related-party report; sector codes drive concentration; sanction-limit ageing drives the LEF report. Layer transitions — Middle to Upper, for example — are a configuration change, not a code change.