Reserve Bank of India revises NBFC concentration risk rules withdraws government owned exemptions and raises IFC group limit to 45 per cent

The Reserve Bank of India has issued a third amendment to its Non-Banking Financial Companies Concentration Risk Management Directions, changing how concentration limits apply to government owned NBFCs and certain upper-layer entities. Government owned NBFCs must now follow the concentration norms and limits for the regulatory layer in which they are classified, and the exemptions previously granted to them have been withdrawn. Existing breaches, including drawdown of already sanctioned limits, may run off until maturity, provided no further exposure is taken on those obligors. A government owned NBFC in the Middle Layer or Upper Layer may still take exposure beyond prudential limits if the additional exposure is fully covered by eligible credit risk transfer instruments, resulting in zero net incremental exposure. The amendments also revise upper-layer exposure treatment and limits for infrastructure finance companies. Exposures offset by State Government guarantees will be treated as exposures to the guaranteeing State Government and exempted from prudential exposure limits, with a 20 per cent risk weight applied to those offset exposures. For upper-layer NBFC infrastructure finance companies, the limit for exposure to a group of connected counterparties has been amended to 45 per cent, and an IFC may exceed the exposure limit by a further 20 per cent of its Tier 1 capital for such group exposures. The changes also delete paragraph 19 in Chapter III of the 2025 directions. The amendment directions took effect from the date of issuance.