NBFC Concentration Risk Directions, 2025: limits, connected groups and reporting
The consolidated edition updated 25 August 2026 separates Base Layer policy limits, Middle Layer concentration ceilings and Upper Layer large exposures.
Finin2min · Updated 25 October 2026
Rules, scope and practical implications
Applicability is narrower than every NBFC
The Direction lists deposit-taking NBFCs, ICCs, factors, MFIs, IFCs and IDF-NBFCs, with special HFC, MGC and SPD scope. It excludes P2P, AA, CIC, NOFHC and Type I certificate holders, plus the stated Base Layer category with customer interface but no public funds. Government-owned covered NBFCs now follow their layer’s norms. Specified existing government-NBFC breaches can run off to maturity without further obligor exposure; eligible fully covered incremental risk-transfer cases have a separate qualification.
Sources: RBI NBFC Concentration Risk Management Directions, 2025 — updated 25 August 2026 — paragraphs 1–3
Three layer approaches
Covered Base Layer NBFCs set Board-approved concentration limits. Ordinary Middle Layer ceilings are 25% of Tier 1 for a single party and 40% for a group, with specified infrastructure additions; IFCs use 30% and 50%. Upper Layer applies the LEF, with a 10% large-exposure definition, an ordinary 20% single-counterparty limit and 25% connected-group limit, plus the precisely specified approvals, infrastructure and IFC conditions. Middle Layer percentages must not be copied to Upper Layer.
Capital and exposure must be measured consistently
Use the defined Tier 1 capital base, the latest available audited or limited-review statements for the stated Middle Layer norms, and the external-auditor certificate/submission requirement before recognising capital augmentation. Both balance-sheet and converted off-balance-sheet exposure count. Factoring with recourse is reckoned on the assignor; without recourse it is on the debtor, with the stated international-factor exception. Risk-transfer relief follows conditions, including direct, explicit, irrevocable and unconditional guarantees where required.
Limits within the portfolio
The ₹1 crore-per-borrower IPO-subscription funding ceiling, separate Board limits for capital-market and commercial-real-estate exposure, land-acquisition sub-limit, unsecured-consumer-credit controls and depreciating-asset top-up treatment sit alongside counterparty limits. Upper Layer Boards also set limits for important other sectors and NBFC-sector exposure. A lower internal limit can bind before the regulatory ceiling.
Connected groups, exceptions and reporting
Assess control and economic dependence under paragraph 4, not only a shared legal-company name. The LEF’s sovereign, deducted-group and specifically permitted insurance-equity exceptions have defined boundaries. CCP trade exposure and collateral/other exposures receive different treatment. Paragraph 48 and its Annex I require the ten largest exposures irrespective of percentage, alongside the specified large, gross and exempt exposure categories. The separate NBFC Supervisory Returns inventory, entry 12, requires the twenty largest exposures in its Large Exposure Framework return, together with its listed other categories. Prepare the twenty-largest population for that supervisory return; the ten-largest Annex I statement does not describe the entire return requirement. Breaches require immediate RBI reporting, rapid correction and a stop on further relevant exposure until within limit.
Sources: RBI NBFC Concentration Risk Management Directions, 2025 — updated 25 August 2026 — paragraphs 4(3), 29–32, 36–48; RBI NBFC Concentration Annex I — official blank Large Exposures return — PDF pages 1–2; RBI NBFC Supervisory Returns Directions, 2026 — 31 July 2026 — return inventory, entry 12
Practical illustration and assumptions
Hypothetical: an Upper Layer NBFC has ₹1,000 crore of eligible capital and ₹100 crore of exposure to a counterparty. The exposure is 10% and therefore meets the large-exposure definition, even though it is below the ordinary 20% single-counterparty ceiling. Separate connected-group, internal-sector and reporting tests can still apply.
Questions answered
Should the supervisory LEF return stop at the ten largest exposures?
No. Paragraph 48 and Annex I specify the ten largest, but the Supervisory Returns inventory separately specifies the twenty largest for its LEF return, alongside the other listed categories. Use each requirement in its own reporting context.
Does net risk relief remove every reporting obligation?
No. Paragraph 48 includes specified gross exposures, exempt exposures and the ten largest; the separate supervisory LEF return inventory also specifies the twenty largest.
Official sources and editions
- RBI NBFC Concentration Risk Management Directions, 2025 — updated 25 August 2026
- RBI NBFC Concentration Annex I — official blank Large Exposures return
- RBI NBFC Supervisory Returns Directions, 2026 — 31 July 2026
Illustrations are hypothetical and depend on the stated assumptions. Official blank formats and guidance are identified separately from completed reports.