NBFC Rules Not on Par with Banks: RBI Deputy Governor | India Business News

Feb 9, 2024

Mumbai: Deputy Governor of RBI M Rajeshwar Rao said that big finance companies retain some profits banks and the face becomes relatively lighter regulation Due to micro regulatory approach of RBI.
Rao, who was refuting the criticism that finance companies are being regulated at par with banks, said NBFCs have a less stringent regulatory framework. The Deputy Governor said that NBFCs here have bucked the global trend of contraction and have grown to control a significant portion of the country's credit.
In a speech titled 'No More a Shadow (of a) Bank' at a summit organized by the Confederation of Indian Industry here, Rao said, “Globally, the non-bank financial intermediation sector is projected to shrink by 3% in 2022, while India “has increased by almost 10%, the highest among all economic categories monitored by the Financial Stability Board.”
The Deputy Governor particularly noted the areas of concern in NBFC peer-to-peer lending, where the majority of lenders were individuals. He also raised the issue of NBFCs being overly dependent on banks for funds to grow rapidly and lax underwriting standards. “Now is the time for the NBFC sector to come out of its shadow along with the banking sector,” Rao said.
Rao noted India's position as one of the few countries to experience growth in the share of total financial assets held by NBFCs. “By March 2023, the credit to GDP ratio of NBFCs was 12.6% and banking sector assets were 18.7%, showing a substantial increase from 13% a decade ago,” he said.

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