Strengthening regulation

Growth of NBFCs needs better supervision by RBI

Non-banking financial companies (NBFCs) play an important role in the Indian financial system. They complement the banking system in credit intermediation, which is also reflected in the sector’s growth. The size of the NBFC sector has gone up from about 12 per cent of banking assets in 2010 to about a quarter. While the expansion has helped the economy, light-touch regulation in the sector can increase systemic risk. Some NBFCs have considerably large balance sheets. In this context, to strengthen the regulatory framework of the sector, the Reserve Bank of India (RBI) published a discussion paper last week.

The proposals are