UPSC Prelims Practice Questions — RBI tags Tata Sons NBFC-UL, pressure mounts for listing

Q1. Under the Reserve Bank of India's Scale Based Regulation framework for NBFCs, the ten largest NBFCs in terms of asset size are placed in which one of the following layers?

  • A. Base Layer (NBFC-BL), unless they raise or hold public funds
  • B. Middle Layer (NBFC-ML), unless they accept public deposits
  • C. Upper Layer (NBFC-UL), irrespective of any other factor
  • D. Top Layer (NBFC-TL), irrespective of any other factor

Q2. With reference to the Reserve Bank of India's Scale Based Regulation (SBR) framework for NBFCs and the changes proposed to it, consider the following statements: 1. The SBR framework was introduced through an RBI circular of October 2021 and became effective from October 2022, replacing the earlier size-based regulatory approach with a four-layered structure. 2. Under the RBI's proposed revision, Upper Layer status would be determined purely by an absolute asset-size threshold of ₹1,000 crore, in place of the existing scoring methodology. 3. Under the proposed revision, an entity once designated as an Upper Layer NBFC would exit the enhanced regulatory requirements only after failing to meet the classification criteria for five consecutive years. Which of the statements given above is/are correct?

  1. The SBR framework was introduced through an RBI circular of October 2021 and became effective from October 2022, replacing the earlier size-based regulatory approach with a four-layered structure.
  2. Under the RBI's proposed revision, Upper Layer status would be determined purely by an absolute asset-size threshold of ₹1,000 crore, in place of the existing scoring methodology.
  3. Under the proposed revision, an entity once designated as an Upper Layer NBFC would exit the enhanced regulatory requirements only after failing to meet the classification criteria for five consecutive years.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q3. When the Reserve Bank of India first identified NBFCs for the Upper Layer under the Scale Based Regulation framework, within how many months of such identification were the identified NBFCs required to put in place a Board-approved policy for adoption of the enhanced regulatory framework?

  • A. One month from the date of identification
  • B. Three months from the date of identification
  • C. Six months from the date of identification
  • D. Twelve months from the date of identification

Q4. Under the Scale Based Regulation framework, what exactly does the 'minimum period' condition attached to Upper Layer classification of an NBFC mean?

  • A. Enhanced regulatory requirements apply for at least three years, coinciding with the deadline for mandatory listing on a stock exchange
  • B. Enhanced regulatory requirements apply for at least five years from classification, even if the entity does not meet the parametric criteria in subsequent years
  • C. Enhanced regulatory requirements apply for at least two years, after which annual re-assessment alone determines continuation
  • D. Enhanced regulatory requirements apply for at least ten years, unless the entity is moved to the Top Layer by the RBI earlier

Q5. With reference to the Reserve Bank of India's regulatory framework for Core Investment Companies (CICs), consider the following conditions: 1. It holds not less than 90 per cent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies. 2. Its investment in the equity shares of group companies, including instruments compulsorily convertible into equity within ten years, is not less than 60 per cent of its net assets. 3. It has total assets of not less than ₹500 crore, either individually or in aggregate along with other CICs in the group. 4. It does not trade in its investments in shares, bonds, debentures, debt or loans in group companies, except through block sale for the purpose of dilution or disinvestment. Which of the above is/are correctly identified?

  1. It holds not less than 90 per cent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.
  2. Its investment in the equity shares of group companies, including instruments compulsorily convertible into equity within ten years, is not less than 60 per cent of its net assets.
  3. It has total assets of not less than ₹500 crore, either individually or in aggregate along with other CICs in the group.
  4. It does not trade in its investments in shares, bonds, debentures, debt or loans in group companies, except through block sale for the purpose of dilution or disinvestment.
  • A. 1 and 3
  • B. 2, 3 and 4
  • C. 1, 2 and 4
  • D. 3 and 4 only

Q6. With reference to the Reserve Bank of India's revised guidelines for Core Investment Companies, consider the following statements: 1. The number of layers of CICs within a group, including the parent CIC, is restricted to two. 2. A CIC must constitute a Group Risk Management Committee with at least five members, of whom at least two are independent directors, meeting at least once every quarter. 3. A CIC with total assets exceeding ₹5,000 crore must appoint a Chief Risk Officer. 4. The revised guidelines gave effect to the recommendations of a Working Group chaired by U. K. Sinha, former Chairman, Securities and Exchange Board of India. Which of the above is/are NOT correct?

  1. The number of layers of CICs within a group, including the parent CIC, is restricted to two.
  2. A CIC must constitute a Group Risk Management Committee with at least five members, of whom at least two are independent directors, meeting at least once every quarter.
  3. A CIC with total assets exceeding ₹5,000 crore must appoint a Chief Risk Officer.
  4. The revised guidelines gave effect to the recommendations of a Working Group chaired by U. K. Sinha, former Chairman, Securities and Exchange Board of India.
  • A. 1 and 3
  • B. 2 and 4
  • C. 1, 2 and 4
  • D. 4 only

Q7. How many NBFCs figure in the Reserve Bank of India's list of Upper Layer NBFCs under the Scale Based Regulation framework for 2026-27?

  • A. Thirteen NBFCs, including one Core Investment Company
  • B. Fifteen NBFCs, including one Core Investment Company
  • C. Seventeen NBFCs, including one Core Investment Company
  • D. Nineteen NBFCs, including one Core Investment Company

Q8. The method originally prescribed by the Reserve Bank of India for identifying NBFCs for the Upper Layer, before the proposed shift to an absolute size criterion, is best described as:

  • A. A scoring exercise applied to eligible NBFCs alongside asset size, combining quantitative parameters with supervisory inputs
  • B. A ranking of NBFCs by the number of retail borrowers served in the preceding financial year, published annually by the RBI
  • C. A peer assessment in which existing Upper Layer NBFCs evaluate the risk-management systems of candidate entities
  • D. An automatic inclusion of every NBFC whose public deposits exceed a threshold prescribed by the RBI from time to time

Q9. The Scale Based Regulation framework, through which the Reserve Bank of India applies regulatory intensity proportionate to the systemic importance of an NBFC, was introduced and brought into force in which of the following?

  • A. Introduced by circular in October 2021 and made effective from October 2022
  • B. Introduced by circular in October 2022 and made effective from April 2023
  • C. Introduced in November 2019 on the recommendations of the Working Group on Core Investment Companies
  • D. Introduced in February 2026 in place of the earlier Master Direction governing NBFCs

Q10. With reference to the shareholding of Tata Sons Private Limited, consider the following shareholder–stake pairs: 1. Shapoorji Pallonji Group — about 18 per cent, making it the second-largest shareholder 2. Sir Dorabji Tata Trust — about 27.98 per cent 3. Sir Ratan Tata Trust — about 23.56 per cent 4. JRD Tata Trust — about 18 per cent Which of the above pairs is/are NOT correctly matched?

  1. Shapoorji Pallonji Group — about 18 per cent, making it the second-largest shareholder
  2. Sir Dorabji Tata Trust — about 27.98 per cent
  3. Sir Ratan Tata Trust — about 23.56 per cent
  4. JRD Tata Trust — about 18 per cent
  • A. 1 and 2
  • B. 2 and 3
  • C. 3 only
  • D. 4 only

Q11. In debates on the governance of large unlisted holding companies in India, reference is frequently made to the statutory 'Code for Independent Directors', which requires independent directors to safeguard the interests of all stakeholders, particularly minority shareholders. This Code is set out in which one of the following Schedules to the Companies Act, 2013?

  • A. Schedule III, read with the provisions on financial statements
  • B. Schedule IV, read with sub-section (8) of section 149
  • C. Schedule V, read with the provisions on managerial appointments
  • D. Schedule VII, read with the provisions on corporate social responsibility