RBI Dy Gov Murmu urges NBFCs, HFCs to diversify funding, cut market risk
Synopsis
RBI Deputy Governor Shirish Chandra Murmu used the CII NBFC-HFC Summit to issue a pointed warning: the sector's reliance on short-term wholesale funding is a structural fault line. With NBFC credit now at 16.7% of GDP and growing, the RBI wants securitisation to evolve into genuine risk transfer — not just a liquidity patch — before the next stress episode arrives.
Key Takeaways
RBI Deputy Governor Shirish Chandra Murmu addressed the CII NBFC and HFC Summit in Mumbai on 3 September .
He urged NBFCs and HFCs to diversify funding sources and reduce dependence on short-term wholesale borrowing.
NBFC credit now stands at approximately 16.7% of nominal GDP, up from 15.9% a year earlier.
NBFC lending is equivalent to roughly 27% of scheduled commercial bank credit, up from 26% the previous year.
Murmu called for securitisation to evolve into a genuine risk-transfer mechanism with 'skin-in-the-game' and transparency rules, rather than a liquidity tool alone.
A deeper, more liquid corporate bond market was identified as a key avenue for NBFC fundraising.
Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu on Thursday, 3 September called on non-banking financial companies (NBFCs) and housing finance companies (HFCs) to broaden their funding mix and reduce vulnerability to abrupt market shifts, as the sector moves into what he described as a new phase of growth.
Key Developments
Addressing the Confederation of Indian Industry (CII) NBFC and HFC Summit in Mumbai, Murmu said funding diversification was central to building sectoral resilience. He pointed to a deeper and more liquid corporate bond market as a critical enabler, pledging continued regulatory engagement to develop one. 'Entities must diversify their funding sources. A deep, liquid corporate bond market will help, and we will keep working with market participants to build one,' he said.
Lessons from Past Liquidity Stress
Murmu drew on previous episodes of liquidity stress — widely understood to refer to the IL&FS crisis of 2018 and its aftermath — to underscore structural vulnerabilities in the sector. Those episodes, he noted, exposed weaknesses in asset-liability management and revealed the sector's heavy dependence on short-term wholesale funding. They also laid bare the tight interlinkages between NBFCs and the broader financial system, making stronger governance and risk management non-negotiable.
Securitisation Must Evolve Beyond a Liquidity Tool
The Deputy Governor also called for a fundamental rethink of how securitisation is used within the NBFC ecosystem. He argued that securitisation should graduate from being primarily a liquidity management instrument to a genuine mechanism for risk transfer and capital release. 'Securitisation should also grow beyond a liquidity tool into a genuine way to transfer risk and free up capital, with proper skin-in-the-game and transparency rules,' Murmu said.
NBFCs' Growing Weight in India's Credit Ecosystem
Murmu cited data showing that NBFC credit now accounts for approximately 16.7 per cent of nominal GDP, up from 15.9 per cent a year earlier. Their outstanding credit is also equivalent to roughly 27 per cent of loans extended by scheduled commercial banks, compared with 26 per cent in the previous year. The figures signal a steady expansion of the sector's systemic footprint.
From Alternative Lenders to Specialised Financial Partners
Murmu framed the sector's evolution in strategic terms, arguing that NBFCs and HFCs have moved well beyond their historical role as alternative lenders. Their sector-specific expertise and ability to serve underserved borrowers, he said, make them indispensable to India's credit architecture. 'NBFCs and HFCs are no longer on the sidelines of this story. They extend credit to the last mile, reach the underserved, and bring innovation to lending across the country,' he said. The remarks signal that the RBI views robust NBFC governance not merely as a compliance matter but as a prerequisite for sustainable financial inclusion.
Point of View
Not a crisis alarm — but the subtext is clear. The RBI has watched the NBFC sector recover from the 2018 liquidity shock and is determined not to repeat it at greater systemic scale. The sector's rising share of GDP credit — now at 16.7% — means the next stress episode would carry larger spillover risk than before. The push for genuine securitisation with skin-in-the-game rules is particularly significant: it signals the RBI wants risk to be priced and distributed, not quietly warehoused on NBFC balance sheets. What mainstream coverage underplays is that the corporate bond market in India remains shallow and illiquid despite years of policy intent — urging NBFCs to tap it is sound advice only if the market actually develops.
NationPress
3 Sept 2026
Frequently Asked Questions
What did RBI Deputy Governor Murmu say about NBFC funding at the CII summit?
RBI Deputy Governor Shirish Chandra Murmu urged NBFCs and HFCs to diversify their funding sources and reduce exposure to sudden market sentiment shifts, speaking at the CII NBFC and HFC Summit in Mumbai on 3 September. He specifically called for a deeper corporate bond market as an additional fundraising avenue.
How large is the NBFC sector relative to India's economy?
NBFC credit currently accounts for approximately 16.7 per cent of India's nominal GDP, up from 15.9 per cent a year earlier, according to figures cited by Murmu. Their lending is also equivalent to roughly 27 per cent of credit extended by scheduled commercial banks.
Why did the RBI flag asset-liability management risks for NBFCs?
Past episodes of liquidity stress — including the fallout from large NBFC defaults — exposed over-reliance on short-term wholesale funding and weak asset-liability management in the sector. Murmu cited these events as evidence of the close links between NBFCs and the broader financial system.
What changes did the RBI call for in NBFC securitisation practices?
Murmu said securitisation should evolve beyond a liquidity management tool into a genuine mechanism for transferring risk and releasing capital, backed by proper skin-in-the-game and transparency rules. The current practice, he implied, does not adequately distribute risk away from originating entities.
How is the role of NBFCs changing in India's financial system?
According to Murmu, NBFCs and HFCs are transitioning from alternative lenders to specialised financial partners, with growing importance in reaching underserved borrowers and driving credit innovation. The RBI views this evolution as central to meeting India's expanding credit needs.
