Closely monitor asset quality, RBI Governor Sanjay Malhotra tells NBFCs

Credit extended by NBFCs has been rising over the years, underscoring their growing importance in financial intermediation

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Monday emphasised the need for sound underwriting standards and close monitoring of asset quality during a meeting with the chief executive officers of non-banking finance companies (NBFCs).

 

The meeting was part of the RBI’s ongoing engagement with regulated entities. The participating NBFCs together account for about 53 per cent of the sector’s total assets, the central bank said in a statement.

 

As of March 31, 2025, there were close to 9,000 NBFCs, including 15 in the upper layer and 656 in the middle layer. The sector is dominated by 15 upper-layer NBFCs, including four housing finance companies (HFCs), which accounted for 30.2 per cent of total assets at the end of March 2025. The middle layer accounted for the largest share of 64.6 per cent largely due to the presence of government-owned NBFCs.

 

 

“In his opening remarks, the governor highlighted the important role of NBFCs and HFCs in facilitating credit flow. He underlined the need for sound underwriting standards and close monitoring of asset quality,” the statement said.

 

Malhotra also stressed the importance of customer-centricity, ethical conduct and responsible lending, along with prompt grievance redressal, to preserve confidence in the sector and support its orderly and sustainable development.

 

Credit extended by NBFCs has been rising over the years, underscoring their growing role in financial intermediation. The regulator noted that this was reflected in credit growth, which surpassed that of banks across all segments except agriculture and allied activities during FY25.

 

According to the latest data, the sector’s asset quality improved further in 2024-25, with the gross non-performing asset (GNPA) ratio declining to 2.9 per cent at the end of March 2025 from 3.5 per cent a year earlier. However, NBFC-microfinance institutions (MFIs) saw a deterioration, with the GNPA ratio rising to 4.1 per cent from 2 per cent over the same period.

 

In its recently released Trends and Progress of Banking in India report, the RBI cautioned NBFCs to remain vigilant about the rising trend in Special Mention Accounts, which is overdue accounts of 30 days and 60 days.

 

A similar interaction with NBFC CEOs was held in February last year. Monday’s meeting was also attended by CEOs of microfinance institutions, representatives of self-regulatory organisations Sa-Dhan, the Micro Finance Institutions Network and the Finance Industry Development Council.

 

Deputy Governors T Rabi Sankar, Swaminathan J, Poonam Gupta and S C Murmu, along with the managing director and chief executive officer of the National Housing Bank and other senior RBI officials, were also present.

 

“During the discussion, participants shared feedback on policy issues and operational matters relating to the NBFC sector,” the RBI said.