Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu has emphasized that robust liquidity management and strong asset quality are foundational pillars for the sustainable growth of Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs).
Speaking at an industry summit, the RBI Deputy Governor highlighted five core focus areas critical for the sector’s long-term health and stability:
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Liquidity Management: Pointing out that past liquidity events exposed vulnerabilities linked to heavy reliance on short-term wholesale funding, Murmu stressed that liquidity risk management is non-optional. He urged entities to diversify their funding sources to prevent market shocks.
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Asset Quality & Underwriting Standards: As credit growth accelerates, lenders must remain cautious. Murmu warned that credit expansion must never compromise underwriting standards. He advocated for rigorous stress testing, early warning systems, dynamic provisioning, and the adoption of AI and machine learning tools to spot borrower stress early.
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Robust Governance and Compliance: Boards and senior management must foster a proactive culture of compliance, ethics, and sustained internal controls as their scale increases.
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Customer Protection and Cybersecurity: Maintaining customer trust is paramount. With rapid digitalization, the central bank underscored that cybersecurity must remain a top priority to protect customer data.
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Responsible Innovation: Technological innovations must serve efficiency and fairness without excluding vulnerable segments or introducing systemic risks.
The RBI reiterated its commitment to proportional regulation and financial stability, noting that NBFC credit currently stands at roughly 27% of scheduled commercial bank credit, transitioning the sector from alternative lenders into specialized financial partners.
