NBFC credit should reach 50% of SCBs' volume by 2047: FM Nirmala Sitharman

Union Finance Minister (FM) Nirmala Sitharman on Wednesday said that non-banking financial companies’ (NBFCs’) credit should aim to reach at least 50 per cent of the total volume disbursed by scheduled commercial banks (SCBs) by 2047. Restoration of risk weights on bank lending, and easing of financial conditions are expected to further improve credit prospects, she added.

 

“Recent regulatory measures such as restoration of risk weights on bank lending and easing of financial conditions are expected to further improve credit prospects, strengthening the overall funding environment for the sector. With the recent Reserve Bank of India (RBI) measures reducing the costs of funds to the sector, (I) urge NBFCs to pass on the benefits of this reduction to customers,” Sitharman said at the NBFC Conclave at Bharat Mandapam in New Delhi.

 

 

The finance minister further said that financial inclusion cannot be used as a pretext for “financial exploitation”.

 

“Lending should be based on genuine needs and repayment capacity of customers, and loans should not be aggressively marketed or pushed onto individuals. Interest rates should be reasonable, and all charges should be clearly disclosed in a simple and transparent manner, free from hidden costs or complicated terms,” she said.

 

Sitharaman further noted that recovery practices must be conducted in a fair, empathetic, and respectful manner, in strict accordance with RBI’s Fair Practices Code. “The push for growth should not come at the expense of customer wellbeing,” the FM stressed.

 

She added that as the NBFC model matures, the focus on risk management should increase.

 

“Risk-taking must be well-planned and data-driven, and never beyond the absorption capacity of the entity concerned. Liquidity and credit risks must be rigorously assessed and managed while robust internal controls should ensure oversight on asset-liability mismatches, nature and tenor of the funding sources, and concentration risks. A sustainable business model must be the cornerstone of the sector’s growth, and at the heart of a sustainable credit landscape lies a financially aware and literate customer,” the FM added. 

 

She also said that NBFCs are no longer “shadow banks” — their stronger regulation and oversight is the best testimony to their importance in the financial system and the broader economy.

 

“Some systemically significant NBFCs have grown in size and complexity, with governance and compliance standards comparable to banks. This marks an important evolution — where robust NBFCs can graduate to banks, creating a continuum of institutional growth within the financial sector,” Sitharaman said.

 

She also noted that a strong, future-ready financial ecosystem requires deep collaboration between NBFCs and banks. The synergy between the two has already delivered notable results, especially through colending arrangements.

 

“Going forward, such partnerships should be institutionalised and scaled. A seamless digital colending architecture, common onboarding standards, and interoperable servicing platforms can greatly enhance credit flow to underserved sectors while ensuring risk-sharing and efficiency,” she said.

 

Gross loan advances by NBFCs have grown significantly, doubling from ₹24 trillion as of March 2021 to ₹48 trillion as of March 2025. The NBFC ecosystem has over 9,000 registered entities, which range from large infrastructure lenders to niche players in microfinance and asset-backed lending. However, asset quality has shown steady recovery since the pandemic, with the NBFC sector’s gross non-performing assets (NPAs) having steadily declined from 6.4 per cent in March 2021 to reach the current level of 3 per cent in March 2025. Moreover, profitability has also improved with return on assets (RoA) improving from 1.11 per cent in March 2021 to 2.4 per cent in March 2025.

 

While emphasising on technology, Sitharaman said that NBFCs must be a central pillar of the transformation. “NBFCs should aim for 100 per cent adoption of digital processes across the entire loan lifecycle. To enable this, there is a need to develop a minimum common technology standard for all registered NBFCs,” she added.