RBI’s NBFC Upper Layer Rejig May Lift Coverage To 70%, Says CareEdge

Key Takeaways

1. What has happened? A draft proposal may classify NBFCs with assets of ₹1 lakh crore+ as Upper Layer entities, widening tighter supervision.
    
2. What was the previous update? Earlier, 15 Upper Layer NBFCs accounted for 30.2% of sector assets at end-March 2025. CareEdge now pegs possible coverage at 70% by September 2025.

A draft change in NBFC classification could sharply widen stricter oversight, with CareEdge estimating Upper Layer coverage may rise to 70% of sector assets.

India’s large non-bank lenders could be headed for tighter rules if the proposed Upper Layer filter is finalised. The draft shifts the trigger to an asset-based threshold of ₹1 lakh crore+, replacing the older scoring-led method. CareEdge said this could more than double asset coverage under the tougher bucket to around 70% as of September 2025.

In the near term, this can raise compliance, governance and disclosure costs for affected firms, including some state-owned NBFCs that were earlier outside this bracket. Over time, it may tighten supervision across a larger part of the shadow banking space, though firms facing reclassification may have to adjust capital planning and reporting.

What Has Changed In The NBFC Rulebook?
 

The shift is simple on paper but wide in impact. Under the proposal, any NBFC crossing ₹1 lakh crore in total assets may move into the Upper Layer. That is a major break from the present selection framework, where only 15 Upper Layer NBFCs accounted for 30.2% of total sector assets at end-March 2025.
 

For borrowers, the impact may not show up overnight in loan pricing, but stricter oversight of large NBFCs can improve balance-sheet discipline and disclosure. 

That is relevant because NBFCs remain a major credit channel for retail borrowers, MSMEs and vehicle finance users across India. For a quick explainer on how NBFCs work, this LoansJagat guide is useful. 

What Happened Earlier And What Experts Are Saying?

The earlier framework kept most government-owned NBFCs in lower buckets, even though many were large by asset size. The draft changes that and may pull more PSU-linked players into the stricter band. Some reports also flagged that firms below the new threshold could move out over time, while larger entrants may come in.
 

CareEdge’s Sanjay Agarwal said the proposed changes may “materially expand” asset coverage under the Upper Layer. Industry coverage in ETBFSI said likely entrants may already meet capital norms, but governance and disclosure requirements would tighten. The broad fix experts point to is a phased transition so that compliance costs do not spill too quickly into lending operations.
 

Conclusion

If finalised, the rejig could widen stricter supervision across India’s largest NBFCs much faster than earlier expected. The next focus will be on who moves in, who moves out, and how firms absorb the added compliance load.