Rajeshwar Rao: Chasing the horizon

Remarks by Mr Rajeshwar Rao, Deputy Governor of the Reserve Bank of India, at the Confederation of Indian Industry (CII) – Non-Banking Financial Company (NBFC) Summit "Role of NBFCs in Achieving $5 trillion Economy", 22 October 2021.

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

Central bank speech  | 
04 November 2021

Ladies and Gentlemen!

1. It's a pleasure to be with you this morning. Let me thank Mr. Chandrajit Banerjee, Director General, CII for extending this kind invitation to me for delivering this inaugural talk at the summit organised by CII. NBFC sector has received wide ranging attention for past few years for various reasons. As an important cog of the financial system, it holds immense potential with its ability to reach out to vast cross-section of the population and diverse geographies and my focus today is going to be outlining a path for achieving this potential.

2. As many of you might recall, almost a year back in the National E-Summit on Non-Banking Financial Companies organised by ASSOCHAM, I dwelt upon how the regulations for NBFC sector might shape up in future. The year has passed by and I would like to think we have made significant progress in many of those areas. One important point that we had highlighted back then was the principle of proportionality for regulating the non-banking financial entities. The idea was to calibrate the degree of regulatory prescriptions based on the systemic importance of NBFCs and the contagion risk they pose to other entities in the financial system. To give shape to our principle of proportionality idea, we came out with the Discussion Paper on Revised Regulatory Framework for NBFCs- A Scale-Based Approach in January this year for stakeholder comments. We have received and examined these comments internally and I plan to discuss on the approach a bit later in my talk.

3. In today's talk, I would like to focus on three key aspects. First, the uniqueness of non-banking financial sector and its importance in the overall scheme of things for development of the country; second, discuss a bit on the Scale Based Regulations as the way forward for regulatory landscape of NBFC sector. Finally, a few asks from the sector, you may call them asks, suggestions or regulatory expectations or by some other name, essentially these are the issues which I believe the industry needs to pay more attention to.