RBI Advises NBFCs To Look Outside Of Banks For Financing

RBI Advises NBFCs To Look Outside Of Banks For Financing

RBI Advises NBFCs To Look Outside Of Banks For Financing: The RBI has warned about expanding unsecured retail credit and urged significant non-banking financial companies to go outside of banks for loans.

Shaktikanta Das, governor of the Reserve Bank of India, praised the NBFCs’ increased operational resilience and financial health at a meeting with the CEOs of major NBFCs and home finance businesses.

However, he emphasized the need to improve risk management, compliance procedures, governance standards, and internal audits.

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One of the biggest users of bank credit now is NBFCs. In FY23, bank financing to NBFCs was nearly twice as high as credit to industries. Banks have begun working with finance companies to co-lend in addition to making direct loans to them.

The use of bank borrowings, risks associated with rapid credit expansion in the unsecured retail sector, cybersecurity and IT system improvements, provisioning coverage, stressed assets, and lition were some of the major subjects covered in the discussion. preserve transparency in credit pricing, asset-liability management, and adherence to the Fair Practices Code.

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The meeting was also attended by the deputy governors of the RBI and the managing director of the National Housing Bank. The Governor stressed the sector’s importance to the economy and emphasized how crucial NBFCs are in providing loans to neglected areas.

The need of maintaining strong liquidity and efficient asset-liability management procedures was emphasized during the conference. Das emphasized the significance of establishing fairness and transparency in the credit-pricing structures used by these financial institutions.

Participants were required to build a strong grievance redressal procedure and were instructed to abide by the fair practices code. As a big economic contribution, he urged NBFCs and HFCs to concentrate on providing loans to underbanked and unserved areas.

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