Collaboration between NBFCs and banks needs to be institutionalised: FM Sitharaman

New Delhi, July 9 (IANS) Gross loan advances by non-banking financial companies (NBFCs) have grown significantly, doubling from Rs 24 lakh crore as of March 2021 to Rs 48 lakh crore as of March 2025, Finance Minister Nirmala Sitharaman said on Wednesday.

Addressing the ‘NBFC Symposium 2025’ here, she said NBFCs have emerged as an important source of credit for segments that have historically been underserved or excluded.

“The NBFC ecosystem has over 9,000 registered entities, which range from large infrastructure lenders to niche players in microfinance and asset-backed lending. Together, they fulfil a range of credit needs and are the first point of contact for crores of citizens and small businesses seeking financial empowerment,” the Finance Minister told the gathering.

Recent regulatory measures such as the restoration of risk weights on bank lending and the easing of financial conditions are expected to further improve credit prospects, strengthening the overall funding environment for the sector.

“With the recent RBI measures reducing the costs of funds to the sector, I urge NBFCs to pass on the benefits of this reduction onto customers. The government remains committed to supporting the NBFC sector by enabling a responsive policy environment,” she stated.

The Finance Minister further said she wants to assure the industry that “we are committed to a consultative approach, and the issues flagged in the consultations with NBFCs will be examined with due attention”.

“Deep collaboration between NBFCs and banks, especially through co-lending arrangements, needs to be there. Such partnerships should be institutionalised and scaled. A seamless digital co-lending architecture, common onboarding standards, and interoperable servicing platforms can greatly enhance credit flow to underserved sectors while ensuring risk-sharing and efficiency,” she highlighted.

NBFCs are no longer 'shadow banks', their stronger regulation and oversight is the best testimony of their importance in the financial system and the broader economy.

“Some systemically significant NBFCs have grown in size and complexity, with governance and compliance standards comparable to banks. This marks an important evolution, where robust NBFCs can graduate to banks, creating a continuum of institutional growth within the financial sector,” she noted.

--IANS

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