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NBFC to Implement Core Financial Services Solution by 2025


Core Financial Services Solution: Relevance

  • GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.


Non Banking Financial Companies: Context

  • Recently, Reserve Bank of India has asked certain class of Non-Banking Financial Companies (NBFC) to mandatorily implement ‘Core Financial Services Solution (CFSS)’ by 2025 in order to provide seamless customer interface as well as have a centralised data base.


NBFC CFSS: Key points

  • RBI 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.
  • As per the timeline prescribed by the RBI, the two categories of NBFCs have to implement CFSS on or before September 30, 2025.
  • While NBFC – Upper Layer shall ensure that the CFSS is implemented at least in 70 per cent of ‘Fixed point service delivery units’, 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.


NBFC to Implement Core Financial Services Solution by 2025_40.1


Understanding the basics

  • Know about NBFC here.
  • 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.
  • The Upper Layer consists of those NBFCs that are specifically identified by RBI as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology.
    • The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer.
  • 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.
  • Core Financial Services Solution: Core Financial Services Solution (CFSS) is akin to the Core Banking Solution (CBS) adopted by banks.
    • The CFSS will provide for seamless customer interface in digital offerings and transactions relating to products and services with anywhere / anytime facility,
    • CFSS also enable integration of NBFCs’ functions, besides providing centralised database and accounting records.


Economy Notes for UPSC

Core Sector Industries Special Economic Zones in India Government Imposes 30 per cent Tax on Proceeds of Digital Currency 1000 Day Plan for 1 trillion Dollar Digital Economy India to Become Asia’s Second Largest Economy by 2030
How can India be a 5 trillion-dollar Economy Inflation in India LPG Reforms in India RBI Working Group Report on Digital Lending National Income and Related Aggregates
Monetary Policy in India 15th Finance Commission Different Types of Deficits in Budget Fiscal Responsibility and Budget Management (FRBM) Act, 2003 Prompt Corrective Action: RBI brings NBFC under PCA
SEBI Bans Derivative Trade in Agricultural Commodities Rupee Depreciation in 2021 Anti-Dumping Duty Domestic Systematically Important Insurers Balance of Payment
Reverse Repo Normalisation Declining Forex Reserve in India Priority Sector Lending: Meaning, history, targets, revision Bank Nationalisation in India Various Inflation Indices in India

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