RBI Deputy Governor outlines five growth pillars for NBFC sector

Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu has outlined five key areas essential for the sustainable growth of the Non-Banking Financial Company (NBFC) sector. As NBFCs transition from alternative lenders to specialized financial partners, Murmu emphasized that their administrative and institutional frameworks must strengthen alongside their expanding scale.

In the RBI's September bulletin, Murmu noted that NBFC credit has reached 16.7 percent of gross nominal GDP, up from 15.9 percent a year prior. Additionally, the NBFC sector's share in total credit provided by scheduled commercial banks has risen to 27 percent.

The five priority areas identified include:

1. Good Governance: Prioritizing strong administrative systems, compliance, and ethical values driven by boards and top management. 2. Liquidity Management: Diversifying funding sources and utilizing a deep corporate bond market to mitigate pressures from market sentiment shifts. 3. Asset Quality and Risk Management: Managing non-performing assets (NPAs) as credit growth accelerates. 4. Securitization: Using it as an effective tool for risk transfer and capital release through transparency and regulatory standards. 5. Cybersecurity: Ensuring robust protection as the sector evolves.