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Daily Category  (GS PAPER III)

RBI proposes 4-tier structure for tighter regulation of NBFCs


The Reserve Bank of India (RBI) has proposed a tighter regulatory framework for non-banking financial companies (NBFCs) by creating a four-tier structure with a progressive increase in intensity of regulation.

                                 Non Banking Financial Company (NBFCs) - An Overview | LegalRaasta


  • Four-layered structure: RBI has said the regulatory and supervisory framework of NBFCs should be based on a four-layered structure:
  1. Base Layer,
  2. Middle Layer,
  3. Upper Layer and
  4. Top Layer.
  • Classification of NPAs: Of base layer NBFCs
    • From 180 days
    • To 90 days overdue.
  • Classification of NBFCs:
  1. NBFC-BL: NBFCs in lower layer will be known as NBFC-Base Layer (NBFC-BL).
  2. NBFC-ML: NBFCs in middle layer will be known as NBFC-Middle Layer (NBFC-ML).
  3. NBFC-UL: An NBFC in the Upper Layer will be known as NBFC-Upper Layer (NBFC-UL) and will invite a new regulatory superstructure.
  4. There is also a Top Layer, ideally supposed to be empty.
  • NBFC in the Upper Layer: Once an NBFC is identified as NBFC-UL, it will be subject to enhanced regulatory requirement at least for four years from its last appearance in the category.
    • Even where it does not meet the parametric criteria in the subsequent year.
    • “Hence, if an identified NBFC-UL does not meet the criteria for classification for four consecutive years, it will move out of the enhanced regulatory framework,” it said.


BASE LAYER: It will consist of NBFCs, currently classified as non-systemically important NBFCs (NBFC-ND), NBFCP2P lending platforms, NBFCAA, NOFHC and Type I NBFCs.

MIDDLE LAYER: As one moves up, the next layer can consist of NBFCs currently classified as systemically important NBFCs (NBFC-ND-SI), deposit taking NBFCs (NBFC-D), housing finance companies, IFCs, IDFs, SPDs and core investment companies.

  • The regulatory regime for this layer will be stricter compared to the base layer.
  • Adverse regulatory arbitrage vis-à-vis banks can be addressed for NBFCs falling in this layer in order to reduce systemic risk spill-overs.

UPPER LAYER: NBFCs which are identified as systemically significant among. This layer will be populated by NBFCs which have large potential of systemic spill-over of risks and have the ability to impact financial stability.

  • There is no parallel for this layer at present, as this will be a new layer for regulation.
  • The regulatory framework for NBFCs falling in this layer will be bank-like.

TOP LAYER: It is possible that considered supervisory judgment might push some NBFCs from out of the upper layer of the systemically significant NBFCs for higher regulation/supervision.

  • It will occupy the top of the upper layer as a distinct set.
  • It will remain empty unless supervisors take a view on specific NBFCs.
  • If a Upper layer NBFCs pose extreme risks, they can be put into it.


The NBFC sector has seen tremendous growth in recent years. In last five years alone, size of balance sheet of NBFCs (including HFCs) has more than doubled from

  • Rs 20.72 lakh crore (2015)
  • Rs 49.22 lakh crore (2020)

Non-banking Financial Companies (NBFCs):

  • A company registered under the Companies Act, 1956. 
  • They cannot accept demand deposits like commercial banks as they are not a part of clearance and settlement system. 
  • They can be engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/ securities issued by government or local authority. 
  • NBFCs- two types- Deposit taking and Non deposit taking. 
  • It is mandatory for a NBFC to get itself registered with the RBI as a deposit taking company. 
  • Regulator- RBI. 
  • No activities in- Agri+ Industry+ Gold+ Construction of properties. 
  • NBFCs not regulated by RBI- Nidhi comp, Chit Fund, Housing financial comp, insurance comp, VCF, Merchant banks etc. 
  • Deposits are not insured in NBFCs. 
  • CAR-15% need to maintain. 

Source: The Indian Express

India to expand research, tourism in Arctic


India has unveiled a new draft ‘Arctic’ policy that, among other things, commits to expanding

  • Scientific research,
  • Sustainable tourism and
  • Mineral oil and gas exploration in the Arctic region.

                               Arctic Council: Members, Benefits & Concerns for India - IAS EXPRESS


Open to public comments: The draft policy is open to public comments until January 26 and has been prepared after deliberations among several ministries.

National Centre for Polar and Ocean Research: India expects the Goa-based National Centre for Polar and Ocean Research to lead scientific research and act as a nodal body to coordinate among various scientific bodies to promote domestic scientific research capacities by expanding in Indian Universities

  • Earth sciences,
  • Biological sciences,
  • Geosciences,
  • Climate change and
  • Space related programmes,
  • Dove-tailed with arctic imperatives.

Other objectives of the policy: It includes programmes for mineral/oil and gas exploration in petroleum research institutes and encouraging tourism and hospitality sectors in building specialised capacities and awareness to engage with Arctic enterprises.”

Impact of Arctic on Climate and Seasons: However, climate change has meant that seasons in the Arctic influence tropical weather.

  • The Arctic influences
    • Atmospheric,
    • Oceanographic and
    • Biogeochemical cycles of the earth’s ecosystem.

Spill over effect of Global Warming/Arctic Melting: The loss of sea ice, ice caps, and warming of the ocean and atmosphere would

  • Lower salinity in the ocean,
  • Increase the temperature differential between land and oceans in the tropical regions, dry subtropical areas and
  • Increase precipitation at higher latitudes.

Use of Arctic Study for India: It will help in study melting rates of the third pole — the Himalayan glaciers, which are endowed with the one of largest freshwater reserves in the world.


  • It began in 2007 and set up a research station ‘Himadri’ in the international Arctic research base at  Svalbard, Norway.
    • Himadri is manned for about 180 days a year.
  • Two other observatories: in Kongsforden and Gruvebadet.
  • Since its establishment, over 300 Indian researchers have worked in the station. India has sent 13 expeditions to the Arctic since 2007 and runs 23 active projects.


Five Arctic littoral states — Canada, Denmark (Greenland), Norway, Russia and the USA (Alaska) —

Arctic Council:

  • 8 Members: Five Arctic littoral states and three other Arctic nations — Finland, Sweden and Iceland — form the Arctic Council.
  • 1996 – Ottawa declaration
  • It is an Intergovernmental forum.
  • It is Not a treaty-based international organization but rather an international forum that operates on the basis of consensus.
  • Its mandate explicitly excludes military security.

The Arctic is home to almost four million inhabitants, of which approximately one-tenth are considered as indigenous people.

Source: The Hindu

Global Innovation Index (GII)

India’s global position rises both in innovations & publications


India’s excellence in science has now been combined with the recognition of its brilliance as an innovative economy.

India now features among the top 50 innovative economies globally as per the Global Innovation Index (GII), placing it ahead of many developed and developing countries.


Third position in terms of publications: Country has already attained the third position in terms of publications.

Scientific excellence and innovation: The combination of scientific excellence and innovation has been possible through encouraging

  • Investments in scientific activities,
  • Infrastructure as well as
  • Manpower development along with
  • Boosting of the entire innovation chain
  • In an environment charged with
  • The start-up India movement.

5th National Science Technology and Innovation Policy: It will help us in creating knowledge and the innovation ecosystem.


NIDHI: At the same time, initiatives of DST like NIDHI have played a crucial role to reach this position.  The implementation of NIDHI has

  • Nurtured 3681 startups under incubation
  • Through the network of around 150 incubators created by dst,
  • Generated 1992 intellectual property.

Start-up India mission: At the same time, the start-up India mission has given a boost to convert these patentable innovative ideas into start-ups levitating India into the country among those with the highest number of start-ups.

  • It brought a paradigm shift in science and technology

India in R&D: India’s national investment in R&D has increased from

  • Rs. 1,13,825.03 crore in 2017-18 to
  • Rs. 1,23,847.71 crore in 2018-19.

Patents filed by Indians: Among the 13,045 patents sealed in the year 2017-18, 1,937 patents were by Indians.

  • However, some states held the lion’s share of patents filed.
  • 65% were filed from the States of Maharashtra, Karnataka, Tamil Nadu, and Delhi.

Publications: The number of publications has increased exponentially over the last 10 years.    

  • National Science Foundation (NSF) of USA: India is currently in third place, only behind China and the United States, with 135,788 scientific articles in the year 2018.
  • Growth rate of scientific publication was 12.9 percent, as against the world average of 4.9 percent.
  • India recorded the fastest average annual growth rate of publications between 2008 and 2018 with 10.73 percent.

The country’s  Per capita R&D expenditure increased to PPP $ 47.2 in 2017-18 from PPP $ 29.2 in 2007-08, as has the R&D manpower to 3.42 lakh in 2018 from 2.83 lakh in 2015. T


Lab to market: The movement to convert ideas to usable technologies and then to scale them up has now spread through the country.

Employment and economic wealth: Further, in the last five years, jobs generated in the form of direct employment were 65,864 and Rs 27,262 crores of economic wealth.