RBI Drafts NBFC/ARC Capital Rule Clarity, Seeks Industry Input
Overview
The Reserve Bank of India is seeking public feedback on draft amendments to clarify capital computation rules for Non-Banking Financial Companies (NBFCs) and Asset Reconstruction Companies (ARCs). These proposed changes address Owned Fund and Tier 1 Capital calculations, impacting concentration risk management. The consultation period closes January 28, 2026.
Capital Rule Clarity
The Reserve Bank of India (RBI) on Tuesday, January 13, launched a public consultation for draft amendments concerning capital rules for non-banking financial companies (NBFCs) and asset reconstruction companies (ARCs). The proposed changes aim to clarify the computation of Owned Fund and Tier 1 Capital.
These clarifications are crucial for the applicability of credit and investment concentration norms. The draft amendments propose modifications to several existing master directions, covering capital adequacy, concentration risk management, and prudential norms for various financial entities including NBFCs, housing finance companies, core investment companies, mortgage guarantee companies, ARCs, and standalone primary dealers.
Stakeholder Consultation
The central bank has set January 28, 2026, as the deadline for stakeholders to submit their comments. Feedback can be channeled through the 'Connect 2 Regulate' portal on the RBI's website or directly to the Department of Regulation at its Mumbai head office.
Currently, NBFCs (excluding those in the upper layer) and ARCs calculate their Tier 1 Capital as of March 31 of the preceding financial year to meet credit and investment concentration requirements. The RBI noted that it has received numerous representations from NBFCs seeking a review of these provisions and clarification on certain aspects of Owned Fund and Tier 1 Capital calculations. Following a review, the draft revisions have been released for public discourse.
