Rajeshwar Rao: NBFC regulation - looking ahead

Speech by Mr Rajeshwar Rao, Deputy Governor of the Reserve Bank of India, at the "National E-Summit on Non-Banking Finance Companies", organized by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), Mumbai, 6 November 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
06 November 2020

Dr. Charan Singh, Shri Deepak Sood, Shri Ramesh Iyer, Shri Vineet Agarwal, Shri S. Ramann, Shri Sunil Kanoria, Shri Raman Agarwal, Ladies and Gentlemen,

I thank the Associated Chambers of Commerce and Industry of India for this very kind invitation to address the 'National E-Summit on Non-Banking Finance Companies'- with the theme "Stability and sustainability of Financial Sector".

2. At this juncture, NBFC sector is passing through a critical phase. Recent failures of certain large Non-Banking Financial Companies (NBFCs), severe liquidity strain confronting the sector and the consequent financial stability concerns have brought NBFC regulations back into focus. I thought that the time is opportune to talk a little bit on the innovative transformations taking place in the NBFC sector and the regulatory response from the Reserve Bank. It would be contextual to take stock of the direction in which regulatory focus has moved and what could be the future shape of NBFC regulations. This is intended as an analysis to evoke discussion and debate on the subject.

Growth of NBFC sector and the need for prudence

3. NBFCs have come a long way in terms of their scale and diversity of operations.