Should Collaboration Between NBFCs and Banks Be Institutionalised?
Click to start listening
Synopsis
Finance Minister Nirmala Sitharaman highlights a significant transformation in the NBFC sector, emphasizing the necessity for collaboration with banks to foster financial inclusion. With gross loan advances doubling, the future looks promising for underserved populations. Discover how these changes could reshape the financial landscape!
Key Takeaways
- NBFCs have doubled their loan advances to Rs 48 lakh crore.
- Over 9,000 registered NBFCs contribute to financial inclusion.
- Regulatory measures are expected to improve credit prospects.
- Collaboration between banks and NBFCs is essential.
- Stronger regulations affirm the role of NBFCs in the economy.
New Delhi, July 9 (NationPress) Gross loan advances from non-banking financial companies (NBFCs) have seen remarkable growth, increasing from Rs 24 lakh crore in March 2021 to Rs 48 lakh crore by March 2025, stated Finance Minister Nirmala Sitharaman during her address on Wednesday.
Speaking at the ‘NBFC Symposium 2025’, she emphasized that NBFCs have become a vital source of credit for demographics that have been historically marginalized or overlooked.
“The NBFC ecosystem boasts over 9,000 registered entities, ranging from major infrastructure lenders to specialized microfinance and asset-backed lending firms. Collectively, they address a wide range of credit needs and serve as the initial point of contact for millions of citizens and small enterprises seeking financial independence,” she noted.
Recent regulatory initiatives, such as the reinstatement of risk weights on bank lending and the relaxation of financial conditions, are anticipated to further bolster credit prospects, thus enhancing the overall funding landscape for the sector.
“With the recent measures by the RBI that lower funding costs for the sector, I urge NBFCs to extend these cost benefits to their customers. The government remains dedicated to fostering the NBFC sector by creating a responsive policy environment,” she added.
The Finance Minister assured the industry of her commitment, stating, “We prioritize a consultative approach, and the concerns raised during discussions with NBFCs will be addressed with careful consideration.”
“A profound collaboration between NBFCs and banks, particularly through co-lending frameworks, is essential. Such alliances should be institutionalized and expanded. A streamlined digital co-lending infrastructure, standardized onboarding processes, and interoperable servicing platforms can significantly improve credit access to underserved sectors while ensuring risk-sharing and operational efficiency,” she stressed.
NBFCs have transitioned from being 'shadow banks'; their enhanced regulation and oversight stand as a testament to their significance in the financial ecosystem and the larger economy.
“Some systemically significant NBFCs have expanded in size and complexity, with governance and compliance standards now on par with those of banks. This represents a crucial evolution, where robust NBFCs can transition into banks, thus creating a continuum of institutional growth within the financial sector,” she concluded.
Point of View
I believe the emphasis on collaboration between NBFCs and banks is pivotal for India's economic growth. The government's proactive stance in fostering a conducive environment for NBFCs showcases a commitment to financial inclusion, ensuring that underserved communities gain access to essential financial services.
NationPress
03/09/2025
Frequently Asked Questions
What are NBFCs?
NBFCs, or non-banking financial companies, are financial institutions that provide various banking services but do not hold a banking license. They play a crucial role in providing credit to underserved sectors.
How much have NBFC loan advances grown recently?
As per Finance Minister Nirmala Sitharaman, gross loan advances by NBFCs have doubled from Rs 24 lakh crore in March 2021 to Rs 48 lakh crore by March 2025.
What is the role of the government in supporting NBFCs?
The government aims to create a responsive policy environment that supports the NBFC sector, enabling them to pass on cost benefits to customers and enhance overall credit accessibility.
