Home » RBI asks NBFC’S to implement core Financial Services Solution by Sep 2025

Reserve Bank asked certain class of Non-Banking Financial Companies (NBFC) to mandatorily implement ‘Core Financial Services Solution (CFSS)‘ by September 30, 2025 in order to provide seamless customer interface as well as have a centralised data base.
In a circular, Reserve Bank of India (RBI) said it has been decided that NBFCs – Middle Layer and NBFCs – Upper Layer with 10 and more ‘fixed point service delivery units’ as on October 1, 2022 shall be mandatorily required to implement CFSS.

CFSS is similar to the Core Banking Solution (CBS) adopted by banks.
CFSS shall provide for seamless customer interface in digital offerings and transactions relating to products and services with anywhere/ anytime facility, enable integration of NBFCs’ functions, provide centralised database and accounting records, and be able to generate suitable MIS, both for internal purposes and regulatory reporting.
As per the timeline prescribed in the circular, the two categories of NBFCs have to implement CFSS on or before September 30, 2025.
However, NBFC – Upper Layer shall ensure that the CFSS is implemented at least in 70 per cent of ‘Fixed point service delivery units’ on or before September 30, 2024.
In the case of NBFC – Base Layer and NBFC – Middle and Upper Layers with fewer than 10 ‘Fixed point service delivery units’, implementation of CFSS is not mandatory.
However, they may consider implementation of a CFSS for their own benefit, the circular said.
Further, a quarterly progress report on implementation of CFSS, along with various milestones shall be furnished by the NBFCs concerned to RBI starting from the quarter ending March 31, 2023.
The Middle Layer consists of all deposit taking NBFCs (NBFC-Ds), irrespective of asset size; non-deposit taking NBFCs with asset size of Rs 1,000 crore and above.

NBFCs undertaking activities, like standalone primary dealers, infrastructure debt fund – NBFCs, core investment companies, housing finance companies, infrastructure finance companies, too fall in the Middle Layer.
The Upper Layer comprises those NBFCs which are specifically identified by RBI as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology.
A ‘fixed point service delivery unit’ is a place of operation from where the business activity of non-banking financial intermediation is carried out by a NBFC and which is manned either by its own staff or outsourced agents.
It carries uniform signage with name of NBFC and functions under administrative control of the NBFC concerned.

A non-banking financial institution(NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency.
NBFC facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering.
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months.
They cannot accept deposits repayable on demand.
NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 per cent per annum.

Base Layer– Shall comprise of (a) non-deposit taking NBFCs below the asset size of Rs 1000 crore and (b) NBFCs undertaking the following activities: (i) NBFC-Peer-to-Peer Lending Platform (NBFC-P2P), (ii) NBFC-Account Aggregator (NBFC-AA), (iii) Non-Operative Financial Holding Company (NOFHC) and (iv) NBFCs not availing public funds and not having any customer interface.
Middle Layer – Shall consist of (a) all deposit taking NBFCs (NBFC-Ds), irrespective of asset size, (b) non-deposit taking NBFCs with asset size of Rs 1000 crore and above and (c) NBFCs undertaking the following activities: (i) Standalone Primary Dealers (SPDs), (ii) Infrastructure Debt Fund – Non-Banking Financial Companies (IDF-NBFCs), (iii) Core Investment Companies (CICs), (iv) Housing Finance Companies (HFCs) and (v) Infrastructure Finance Companies (NBFC-IFCs).
Upper Layerof NBFCs is specifically identified as warranting enhanced regulatory requirement based on certain set of parameters and scoring methodology. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor.
Top Layerwill ideally remain empty now. This layer can get populated if the Reserve Bank is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the Upper Layer. Such NBFCs shall move to the Top Layer from the Upper Layer.

It will also be necessary to mention that RBI has recently accepted some key recommendations of ‘Report of the Internal Working Group (IWG) to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks’ submitted on November 20, 2020.
It prescribes certain standards/norms for NBFCs to convert into universal banks and or small finance banks (SFBs) as they commensurate with the fit and proper and capital base criteria specified therein.
With the diminishing difference between role of banks and NBFCs, RBI is fast moving to scale up regulation, more importantly the risk management practices of NBFCs to move towards bank-like norms.
The underlying reason is the increasing propensity of newly empowered NBFCs to play a bank-like role or they can opt to apply for bank license available on tap.

RBI asks NBFC’S to implement core Financial Services Solution by Sep 2025