Home › Circulars › RBI/2022-23/30

NBFC Upper Layer: 9% CET1 Capital Rule

Current · Source: Reserve Bank of India · RBI/2022-23/30 · issued 19 Apr 2022 · ~2 min read
Quick answerNBFCs in the Upper Layer must now hold Common Equity Tier 1 capital of at least 9% of risk-weighted assets, with detailed rules on what counts as CET1 and what must be deducted. This tightens capital buffers for the largest non-bank lenders.
The rule, in the simplest words
How it plays out — a real example

Rajesh, CFO of a large NBFC-UL, is reviewing the capital position. He finds that the firm's CET1 ratio is 8.5%, below the new 9% requirement. He decides to defer a planned dividend and issue fresh equity to bridge the gap, while ensuring the revaluation reserve from the head office building is discounted correctly.

What changed

The RBI has specified that NBFC-UL must maintain a minimum Common Equity Tier 1 (CET1) ratio of 9% of Risk Weighted Assets, as per the earlier SBR framework. The circular details the components of CET1 capital, including equity, reserves, and eligible profits, and lists mandatory deductions like goodwill and deferred tax assets.

What it means for you

Banks and lenders dealing with NBFC-ULs should expect these entities to hold stronger core capital, reducing counterparty risk. NBFC-ULs will need to recalibrate their capital planning, possibly raising equity or trimming risk-weighted assets to meet the 9% floor. The revaluation reserve discount and profit inclusion rules offer some flexibility but with strict conditions.

What you must do

Who it affects

NBFCs classified in the Upper Layer, Auditors and valuers of NBFC-ULs, Banks and financial institutions lending to NBFC-ULs, Investors in NBFC-UL equity

❓ Common questions

What is the minimum CET1 ratio for NBFC-UL?

NBFC-UL must maintain a Common Equity Tier 1 (CET1) ratio of at least 9% of Risk Weighted Assets on an ongoing basis.

Can revaluation reserves be counted as CET1?

Yes, but only at a 55% discount and subject to conditions like property held for own use, independent valuation every 3 years, and no qualified audit opinion.

How are current year profits included in CET1?

Profits can be included quarterly if audited or limited-reviewed, reduced by 25% of average dividends paid in the last three years, and losses are fully deducted.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications ( 364 kb ) Scale Based Regulation (SBR) for NBFCs: Capital requirements for Non-Banking Finance Companies – Upper Layer (NBFC-UL) RBI/2022-23/30 DOR.CAP.REC.No.21/21.06.201/2022-23 April 19, 2022 Dear Sir/ Madam, Scale Based Regulation (SBR) for NBFCs: Capital requirements for Non-Banking Finance Companies – Upper Layer (NBFC-UL) Please refer to the circular DOR.CRE.REC.No.60/03.10.001/2021-22 dated October 22, 2021 on Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs. 2. In terms of paragraph 3.2.1 (b) of the circular ibid, NBFC-UL shall maintain Common Equity Tier 1 capital of at least 9 per cent of Risk Weighted Assets. The detailed guidelines in this regard are provided below: 3.1. NBFC-UL shall maintain, on an on-going basis, Common Equity Tier 1 (CET1) ratio of at least 9 per cent, where, 3.2. Elements of Common Equity Tier 1 capital will comprise the following: (i) Paid-up equity share capital issued by the NBFC (ii) Share premium resulting from the issue of equity shares (iii) Capital reserves representing surplus arising out of sale proceeds of assets (iv) Statutory reserves (v) Revaluation reserves arising out of change in the carrying amount of an NBFC’s property consequent upon its revaluation in accordance with the applicable accounting standards may, at the discretion of the NBFC, be reckoned as CET1 capital at a discount of 55%, instead of as Tier 2 capital under extant regulations, subject to meeting the following conditions: the property is held for own use, by the NBFC; the NBFC is able to sell the property readily at its own will and there is no legal impediment in selling the property; the revaluation reserves are presented/disclosed separately in the financial statements of the NBFC; revaluations are realistic, in accordance with applicable accounting standards; valuations are obtained, from two independent valuers, at least once in every 3 years; where the value of the property has been substantially impaired by any event, these are to be immediately revalued and appropriately factored into capital adequacy computations; and the external auditors of the NBFC have not expressed a qualified opinion on the revaluation of the property. (vi) Other disclosed free reserves, if any. Note : For Mortgage Guarantee Companies, free reserves include contingency reserves maintained as per paragraph 14(a) of the Master Directions - Mortgage Guarantee Companies (Reserve Bank) Directions, 2016 dated November 10, 2016 . (vii) Balance in Statement of Profit & Loss Account after allocations and appropriations i.e. retained earnings at the end of the previous financial year. Accumulated losses shall be reduced from CET 1. (viii) Profits in current financial year may be included on a quarterly basis if it has been audited or subject to limited review by the statutory auditors of the NBFC. Further, such profits shall be reduced by average dividend paid in the last three years and the amount which can be reckoned would be arrived at as under: EP t =NP t -0.25 *D*t Where: EP t =Eligible profit up to quarter ‘t’ of the current financial year, t varies from 1 to 4 NP t =Net profit upto quarter ‘t’ D=average dividend paid during the last three years Losses in the current year shall be fully deducted from CET 1. (ix) The following regulatory adjustments / deductions shall be applied in the calculation of CET1 capital [i.e. to be deducted from the sum of items (i) to (viii)]: a) Goodwill and other intangible assets Goodwill and all other intangible assets should be deducted from Common Equity Tier 1 capital. The full amount of the intangible assets is to be deducted net of any associated deferred tax liabilities which would be extinguished if the intangible assets become impaired or derecognized under the relevant accounting standards. For this purpose, the definition of intangible assets would be in accordance with the relevant accounting standards. Losses in the current period and those brought forward from previous periods should also be deducted from Common Equity Tier 1 capital, if not already deducted. b) Deferred Tax Assets (DTAs) The following DTAs shall be deducted in full, from CET1 capital – DTAs associated with accumulated losses DTAs (excluding DTAs associated with accumulated losses) net of Deferred Tax Liabilities (DTL) Note : Where the DTL is in excess of the DTA (excluding DTA associated with accumulated losses), the excess shall neither be adjusted against item (i) nor added to CET1 capital. 1 c) Investment in shares of other non-banking financial companies and in shares, debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group 2 exceeding, in aggregate, ten per cent of the owned fund 3 of the NBFC. Note : The lower of acquisition cost or fair value of investments/advances shall be used to arrive at the amount of deduction mentioned above. For the purpose of the above deduction, margin money placed with a subsidiary or company in the same group shall be considered as deposits. d) Impairment Reserve 4 shall be not be recognised in CET1 capital. e) Deductions/ exclusions, required on unrealised gains and/or losses from regulatory capital in terms of paragraphs 3(a) (i) to (iii) of the Annex to DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020 read with circular DOR(NBFC).CC.PD.No.116/22.10.106/2020-21 dated July 24, 2020 on “Implementation of Indian Accounting Standards”, shall be reduced from CET 1 capital. f) Securitisation Transactions: NBFCs shall be guided by the Master Direction no. DOR.STR.REC.53/21.04.177/2021-22 dated September 24, 2021 titled Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 in this regard. g) Defined Benefit Pension Fund Assets and Liabilities: Defined benefit pension fund liabilities, as included on the balance sheet, must be fully recognised in the calculation of CET1 capital (i.e. CET 1 capital cannot be increased through derecognising these liabilities). For each defined benefit pension fund that is an asset on the balance sheet, the asset should be deducted in the calculation of CET1. h) Investments in Own Shares (Treasury Stock): Investment in an NBFC’s own shares is tantamount to repayment of capital and therefore, such investments, whether held directly 5 or indirectly, shall be deducted from CET1 capital. This deduction would remove the double counting of equity capital which arises from direct holdings, indirect holdings via index funds and potential future holdings as a result of contractual obligations to purchase own shares. 3.3. The Total Risk Weighted Assets (RWAs) to be used in the computation of CET1 ratio shall be the same as the total RWAs computed under the relevant Directions of the concerned NBFC category. Applicability 4. This circular is applicable to all NBFCs identified as NBFC-UL, except Core Investment Companies (CICs). 5. CICs identified as NBFC-UL shall continue to maintain, on an on-going basis, Adjusted Net Worth as per the Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 - Core Investment Companies (Reserve Bank) Directions, 2016 dated August 25, 2016 . Yours faithfully, (Usha Janakiraman) Chief General Manager 1 DTAs may be netted with associated deferred tax liabilities (DTLs) only if the DTAs and DTLs relate to taxes levied by the same taxation authority and offsetting is permitted by the relevant taxation authority. The DTLs permitted to be netted against DTAs must exclude amounts that have been netted against the deduction of goodwill, intangibles and defined benefit pension assets. 2 “Companies in the group”, shall mean an arrangement involving two or more entities related to each other through any of the following relationships: Subsidiary – parent, Joint venture, Associate, Promoter-promotee (as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997) for listed companies, a related party, Common brand name, and investment in equity shares of 20 per cent and above. The terms parent, subsidiary, joint venture, associate and related party shall be as defined/ described in applicable accounting standards. 3 “Owned Fund” will carry the same meaning as in the relevant Directions of the concerned NBFC. 4 Please refer to para 2(b) of Annex to circular no. DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020 on Implementation of Indian Accounting Standards, for guidelines on Impairment Reserve. 5 It may be noted that Section 67 of the Companies Act, 2013 restricts the purchase by a company or giving loans by it for purchase of its shares. 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. All Rights Reserved. Sitemap | Disclaimer Website owned and managed by Reserve Bank of India. Contact us on helpdoc[at]rbi[dot]org[dot]in Website last updated date: Aug 01, 2026 Supports: Google Chrome 147+ | Firefox 150+ | Microsoft Edge Version 147+ | Safari 17+ Accessibility Statement | Screen Reader and Accessibility Help
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2022-23/30 · issued 19 Apr 2022. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Topics: NBFC Regulations
Most relevant forCompliance TeamRisk ManagementCredit Manager / UnderwritingCorporate / Wholesale Banking RMInternal AuditSenior Management / Board
🛠 Banker’s toolkit — checklists & reply templates →
Key dataSee the live numbers behind this topic: NPA / Asset-Quality Tracker, Bank Health Scores — updated from official RBI data.
Key termsPlain-English definitions of terms in this circular — see the full Indian banking glossary. NBFC · CRAR (Capital adequacy) · Gross NPA (GNPA) · Wilful defaulter
Related circulars · Department of Regulation
SFB Pillar 3 Disclosure Norms Aligned with BaselUCB Deposit Rate Disclosure & Uniformity Rules UpdatedLAB Deposit Rate Disclosure & Uniformity Rules TightenedPayments Banks: Interest Rates Must Match Disclosed ScheduleRBI Updates Bulk Deposit Rate Rules and Disclosure Timing
Browse all departments →
Who does what — compliance checklist
💻 IT / Systems
  • Align capital raising plans to meet the new norm, as the circular does not specify compliance timelines.
📜 Compliance
  • Review your NBFC-UL classification and compute CET1 ratio against the 9% requirement.
  • Ensure revaluation reserves are discounted by 55% and meet all conditions if used as CET1.
  • Deduct goodwill, intangibles, and deferred tax assets as specified when calculating CET1.
  • Include current-year profits only if audited or limited-reviewed, and adjust for average dividends paid in the last three years.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (NBFCs classified in the Upper Layer, Auditors and valuers of NBFC-ULs, Banks and financial institutions lending to NBFC-ULs, Investors in NBFC-UL equity), your first concrete step on “NBFC Upper Layer: 9% CET1 Capital Rule” is: “Review your NBFC-UL classification and compute CET1 ratio against the 9% requirement.” (RBI issued this 19 Apr 2022).

  1. Circular: RBI/2022-23/30 -- NBFC Upper Layer: 9% CET1 Capital Rule
  2. Issued: 19 Apr 2022
  3. Action required: Review your NBFC-UL classification and compute CET1 ratio against the 9% requirement.
  4. Action required: Ensure revaluation reserves are discounted by 55% and meet all conditions if used as CET1.
  5. Action required: Deduct goodwill, intangibles, and deferred tax assets as specified when calculating CET1.
  6. Action required: Include current-year profits only if audited or limited-reviewed, and adjust for average dividends paid in the last three years.
  7. Action required: Align capital raising plans to meet the new norm, as the circular does not specify compliance timelines.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12296&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
—