MUMBAI: The RBI has mandated that non-banking financial companies (NBFCs) – middle and upper layer -- having 10 and more 'Fixed point service delivery units' as on October 1, 2022 will have to implement Core Financial Services Solution (CFSS), akin to the Core Banking Solution (CBS) adopted by banks, by September 30, 2025.
A fixed point service delivery unit is one where the operations of a shadow bank are conducted.
"The CFSS will 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," said an RBI notification on Wednesday.
While the time frame for upper and middle layer NBFCs has been stipulated by September end 2025, the RBI directed the NBFC-UL to ensure that the CFSS is implemented at least in 70 % of ‘Fixed point service delivery units’ on or before September 30, 2024.
For base layer NBFC and middle and upper layer NBFCs having fewer than 10 fixed point service delivery units implementation of CFSS has been made voluntary.
“A quarterly progress report on implementation of the Core Financial Services Solution, along with various milestones as approved by the Board / Committee of the Board, shall be furnished by the NBFC to the Senior Supervisory Manager (SSM) Office of Reserve Bank starting from quarter ending March 31, 2023," the RBI added.
The Middle Layer shall consist of all deposit taking NBFCs (NBFC-Ds), irrespective of asset size, non-deposit taking NBFCs with asset size of ₹1000 crore and above and NBFCs undertaking the following activities -- Standalone Primary Dealers (SPDs), Infrastructure Debt Fund - Non-Banking Financial Companies (IDF-NBFCs), Core Investment Companies (CICs), Housing Finance Companies (HFCs) and Infrastructure Finance Companies (NBFC-IFCs).
The Upper Layer shall comprise of those NBFCs which are specifically identified by the Reserve Bank as warranting enhanced regulatory requirement. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer.