RBI Governor red flags high dependence of NBFCs on bank loans

Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday expressed grave concern over the high “concentration” of credit that NBFCs were availing from banks to finance their lending operations and said this has emerged as “a risk” in the system.

Addressing the FIBAC 2023 conference here, Das said that there was a need for NBFCs to raise funds from other sources and reduce their dependence on banks to scale down the risk due to the high “interconnectedness”.

He also said that many lenders were depending too much on the algorithms to make their decisions and there was a need to analyse data more carefully before making investment decisions.

The RBI Governor also underlined the fact that very high rates of interest were being charged by lenders in the case of microfinance and there was a need to usher in more transparency and need to avoid “usurious” rates of interest in order to promote economic growth.

At the same time, Das said all business and financial entities need to capitalise on new opportunities and make investments to expand capacities, skill human resources and adopt new technologies to ensure growth.

“The prospects are at a new high in the country and this is the time to make it India’s moment,” he added.