NBFC sector seeks more funds to improve liquidity, regulatory reforms from Budget

New Delhi, July 14: Ahead of the upcoming Union Budget scheduled to be presented on July 23, the Non-Banking Financial Company (NBFC) sector is expecting enhanced financial inclusion and reinforcing digitalization efforts to sustain the sector's growth.

Finance Industry Development Council (FIDC), which represents the industry, has suggested establishing a special refinancing body, just as the government has created National Housing Bank (NHB) for housing finance companies.

On the other hand, the sector this year has seen stringent regulatory action from the Reserve Bank of India (RBI). In addition, speaking at an event in May this year, RBI Deputy Governor Swaminathan J cautioned the NBFCs not to be overly reliant on algo-based credit models.

However, the apex bank, in its 29th Financial Stability Report (FSR) said that the NBFCs are well capitalised, giving an edge to the financial sector in the country. As of the end of March 2024, NBFCs had a CRAR of 26.6 per cent, a GNPA ratio of 4.0 per cent, and a return on assets (RoA) of 3.3 percent.

"The growth of the Indian NBFC industry is significantly influenced by robust financial inclusion, consumer demand, and improving trade balances. The upcoming Union Budget should emphasize enhancing financial inclusion across the country, implementing policy reforms, and reinforcing digitalization efforts to sustain the sector's growth. Financial and digital inclusion will enhance credit access by increasing convenience and reducing turnaround times," said Rakesh Kaul, CEO, Clix Capital.

"The government must consider incentivizing and promoting such measures so that NBFCs can carefully take advantage of global integration, ensuring sustainable growth and financial inclusion across India's diverse economic landscape," said Jitendra Tanwar, Managing Director & CEO of Namdev Finvest Pvt Ltd.