- NBFCs are different from shadow banks as they do not pose systemic risk due to a robust regulatory framework
- Largest organised source for retail credit in unbanked and under banked segment
- Pioneers in asset backed lending
- NBFC share in total assets of Indian Financial system is 9%
NewZNew (Chandigarh) : FIDC (Finance Industry Development Council) the apex representative body-cum-Self Regulatory Organization for NBFCs (Non Banking Finance Companies), specially those engaged in asset financing, today shared its vision for FY 2016-17 to reposition NBFCs in Indian Financial System.
NBFCs over the years have played a vital role in the development of the economy, be it in financial intermediation in rural and semi urban areas or financing activities that are engines of growth, such as transport sector, SMEs and MSMEs, leasing, hire purchase etc.
Majorly, 70% of the Indian population relies on non-banking sources for their credit needs as retail credit through banks is available largely in metropolitan and urban segment of society. NBFCs have been in the forefront of catering to this segment of customers who are un-bankable masses in the rural and semi–urban areas. Through strong linkage at the grassroots level, ability to take quicker decisions and highly personalized customer service, they have created a medium of reach and communication and are very effectively serving this segment that were forced to approach unorganized money lenders for all their credit needs. NBFCs have transformed a borrower, who is “unbanked” into “bankable”.
Mr. Raman Aggarwal says “To further the Government’s agenda on Financial Inclusion, NBFCs are an important driver because of their successful track record of more than 70 years of lending to the unbanked and at the same time a regulation history of more than 18 years. Inspite of the challenges faced by our economy, NBFCs have grown to a level where their share in the total assets of Indian Financial System is 9% as per RBI annual publication report, Dec’14 which is more than the Mutual Funds, Co-operative Banks and Regional Rural Banks. The need is to recognize this role and include NBFCs as part of the mainstream financial system”.
However, NBFCs in India have not received enough support and nurturing from the entire financial system. The current framework of Indian Financial Institution System needs a relook with the focus on actual delivery of credit rather than who does it. It is important to focus on the development of NBFC sector in addition to its regulation, as regulation and development always go hand in hand. This has led to a situation where NBFCs have been grappling with issues like lack of adequate funding, specially for the small and medium sized companies, level playing field with banks and other financial Institutions, especially in taxation matters.
As an effective Self Regulatory Organization cum representative body, FIDC has now embarked on transforming itself to play a “proactive” rather than a “reactive” role. In order to achieve this, the plan is to engage with the regulator and the Government, both at the centre and the states proactively and create a formalized arrangement for a dialogue on a regular basis. This shall enable FIDC to not only address the issues, but also lead to a healthy exchange of mutual concerns, ideas and general economic matters, based on which the required regulatory changes can be made. Also now FIDC will take lead in engaging with other stakeholders like the Indian Banks Association (IBA), Society for Indian Automobile Manufacturers (SIAM), The Transporters body and also the leading Chambers of Commerce an Industry like ASSOCHAM, FICCI, CII, PHD and IMC in order to build strong linkages like funding relationship with banks, and also represent issues of common interest with greater strength.