RBI NBFC-UL draft: ₹1 lakh crore AUM trigger in 2026

What has changed in RBI’s draft framework

The Reserve Bank of India has released draft revisions to its framework for classifying non-banking financial companies (NBFCs) into the Upper Layer (NBFC-UL). The proposal shifts to a single size-based trigger, with assets under management (AUM) exceeding ₹1 lakh crore becoming the threshold for Upper Layer classification. The draft also proposes including state-run companies under the same classification lens, removing the earlier carve-outs that kept some government-owned entities outside the same filter.

India Ratings and Research (Ind-Ra) said the draft is broadly manageable for the sector, but core investment companies (CICs) could be disproportionately affected because of higher compliance and governance requirements once they fall into the Upper Layer.

Why the ₹1 lakh crore AUM trigger matters

Under the revised approach, Upper Layer identification becomes a more predictable, quantified exercise tied to balance sheet or AUM size. Ind-Ra noted that classification will be conducted annually and based solely on the AUM threshold. That creates a sharper regulatory step-up for NBFCs that approach the ₹1 lakh crore mark, because crossing it would automatically move an entity into a tighter regulatory bucket.

Ind-Ra expects NBFCs near the threshold to proactively recalibrate business plans and operating models to avoid sudden regulatory escalation. The core point from the draft is that size alone can now act as the trigger, rather than a combination of size, interconnectedness, and complexity.

Capital requirement: CET1 at 9% for Upper Layer NBFCs

The revised draft framework requires NBFC-UL entities to maintain a minimum Common Equity Tier 1 (CET1) ratio of 9% of risk-weighted assets. Ind-Ra said this is unlikely to be a hurdle for existing Upper Layer NBFCs given their strong capitalisation levels.

For most large incumbent NBFCs, Ind-Ra does not see the changes creating material risks. The agency’s assessment is that the sector, at a broad level, has already adapted to tighter supervision for systemically relevant lenders, and that the incremental requirements are not expected to destabilise the larger players.

Large Exposures Framework: tighter monitoring of concentration

NBFC-UL entities will also need to comply with the Large Exposures Framework (LEF), including board-approved internal exposure limits to sectors such as NBFCs. Ind-Ra believes this requirement is unlikely to significantly disrupt the industry, pointing out that wholesale lending exposure is concentrated among a limited set of players, while most large NBFCs maintain diversified portfolios with a sizeable retail lending component.

However, Ind-Ra highlighted a separate operational challenge for CICs under LEF. Several CICs have highly concentrated investments in step-down subsidiaries, and applying LEF in such structures could be operationally difficult.

CICs stand out as “clear outliers,” Ind-Ra says

Ind-Ra said the NBFC-UL framework is “broadly benign” for the sector at large, but CICs emerge as clear outliers. The rating agency flagged that CICs with consolidated assets approaching or exceeding ₹1 lakh crore will face disproportionate compliance costs under the new regime.

A key uncertainty is whether the AUM threshold will be applied on a consolidated basis or a standalone basis. Ind-Ra warned that if the framework is applied on a consolidated basis for AUM calculation, its scope would extend to several corporate groups operating under a CIC structure, many of which are privately held and unlisted.

Listing requirement becomes a central fault line

Ind-Ra said mandatory listing requirements could prove onerous for several CICs, especially those structured primarily for promoter-level capital allocation rather than public-market access. This matters because CICs are often designed as group holding structures, not as public-facing lending franchises.

At the same time, parts of the broader discussion around the draft have focused on whether the revised directions clearly retain the mandatory listing requirement for Upper Layer CICs. The final draft, Ind-Ra said, may provide greater regulatory clarity and resolve concerns around how these obligations apply to CIC structures.

Tata Sons: why the draft drew market attention

The RBI’s draft arrived amid speculation over the fate of Tata Sons, a CIC, particularly around listing and whether revised directions continue to make listing necessary. Tata Sons had assets of over ₹1.7 lakh crore as of March 2025.

The discussion around Tata Sons also illustrates why the consolidated-versus-standalone question matters for CICs. When a holding company sits atop large operating subsidiaries, a consolidated interpretation can pull more groups into the Upper Layer net.

What stakeholders are watching for in the final version

Ind-Ra’s view is that the revised draft framework is unlikely to have a significant impact on existing NBFCs, but CICs could face challenges with the AUM-based approach. Those challenges include listing equity and enhancing compliance and governance requirements.

Market participants are likely to watch for clarifications on how AUM will be computed for CICs, and how exposure norms will be applied to concentrated intra-group holdings. Clarity on these points will determine the practical burden for promoter-level holding companies versus lending-focused NBFCs.

Key thresholds and requirements in the draft

Why the draft matters for investors and corporate groups

For investors tracking listed NBFCs, the draft is framed as a rulebook that tightens governance and capital expectations mainly through a size trigger. Ind-Ra’s conclusion suggests limited disruption for most large incumbent NBFCs, particularly those already operating with strong capital buffers.

For corporate groups using CIC structures, the story is different. A size-based trigger combined with annual classification increases the risk of a sudden shift into the Upper Layer, along with the associated compliance and governance load. The final shape of the framework, especially on consolidated AUM computation and practical application of LEF, will determine how many CICs fall into the tighter regulatory net.