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.

 

 

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.

 

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