Indian NBFCs: Drivers of Inclusive Growth and Their Expanding Role


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With economic growth of 8.7% in FY 2022, industry thought leaders stand by the fact that the Indian economy’s uptrend was the fastest in the world. In banking and financial spheres, the pandemic, and its many waves, created opportunities for NBFC corporate leaders in India to establish their foothold. Showcasing exactly how developed and forward-looking these enterprises truly are, famous finance personalities in India see these shadow banks taking on a greater role in the Indian financial ecosystem. 

This claim is backed by the growth of other allied sectors – real estate, gold, and banking, and now, NBFC players are lobbying for better, fairer recognition and policy reforms. And rightfully so, they have not only endured and prospered despite the liquidity crisis but also offered last-mile connectivity to disconnected parts of the economy. Industry thought leaders have also been expressive about the pivotal role of NBFCs, and their role as a driver for inclusive growth the nation over. Here are some of their takes. 

NBFCs: Facilitators of inclusive growth

Insights from famous finance personalities in India 

Sanjiv Bajaj

With a vision for India to become a USD 40 trillion economies in the coming decades, top financial leader Sanjiv Bajaj, Chairman & Managing Director of Bajaj Finserv, believes that NBFCs are the future of economic development and should be treated as such. “The financial services space of any country needs to grow at 2-3x that of the economy; so that it supports the economy going forward,” he says. 

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Currently, an NBFC’s role seems limited to last-mile solutions, but with the appropriate risk mitigation policies, these institutes could serve as the bannermen for sustained financial inclusion. 

His views were particularly specific to financing, wherein the thought leader says, “RBI must also open up lines of financing to NBFCs as it did during the pandemic. Provide that as an additional show of confidence — allow NBFCs to get into many other lines of business where currently, banks are allowed.”

In fact, financing was the basis of his argument back in 2020 as well. “Our banks are flush with liquidity, but they aren’t extending funds to NBFCs, housing finance companies, and micro-finance institutions because they don’t want to take credit risk. This is wrong, but it will help if the government covers initial losses. Our economy, with a large domestic consumption base, can restart faster than many other countries, but we need to provide the necessary horsepower at the start.” These opinions speak volumes about the regulator’s role and its impact on shaping the future of NBFCs. 

Rajiv Sabharwal

MD and CEO of Tata Capital, financial leader Rajiv Sabharwal believe that tech-driven NBFCs are leading the charge with regard to technology adoption in the finance sector. He believes that their commitment to offering simplified solutions has laid the roadmap for sustained inclusion. “By creating simple and user-friendly mobile applications, NBFCs are enabling rural population to avail loans in a few minutes and in a hassle-free manner. These innovations match the complex needs of a low-income individual or family and promote financial inclusion.”

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Dinanath Dubhashi

Believing in a bright future for NBFCs, Dinanath Dubhashi, Managing Director and CEO of L&T Financial Services, states that parity is the need of the hour. Much like his request back in 2020, he firmly stands by the notion that NBFCs are financial powerhouses. The challenge of being viewed as a shadow bank is actually an opportunity in disguise. Here, regulators can step up, democratizing access to data to assist NBFCs in catering to the bigger picture of economic development.  

Shaktikanta Das

Sharing his thoughts on the NBFCs and the impact of their role in the economy, Shaktikanta Das, RBI Governor, states that these entities are now at a crossroads and have the freedom to decide their future. With restructuring available at one end, he also goes on to express that these businesses can maintain the status quo without much interference. “BNPL, which is now offered by several e-commerce companies, also comes under lending activity. We have to be careful and calibrated in our approach and not start interfering everywhere,” he said, suggesting no intent to regulate the provision currently. 

Inclusive Growth: Future Outlook

Technology is at the core of this expanding role of NBFCs, and famous entrepreneurs believe it is the key going forward. Shilpa Pophale, MD of Electronica Finance Ltd, says, “There is always space in any industry, and one must give last-mile connectivity to the unserved. MSMEs face challenges in working capital, and that needs to be streamlined. Technology is no more an enabler but the center of anything one does.” This holds true considering the massive market of nano entrepreneurs entering the formalized fray. There’s untapped potential there, a credit market of Rs 2 lakh crore to be precise, and NBFCs have proven themselves capable of meeting such needs. 

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Additionally, NBFCs promote inclusive growth by being trendsetters. As per financial leader Umesh Revankar, VC and MD of Shriram Transport Finance Company, banks are now mimicking their winning strategies, especially with regard to gold loans. Like these, many other innovations foster widespread inclusion in India. 

The demand for policy reform to better accommodate and cater to the growing Indian economy is the collective ask of the Indian regulator. NBFCs have proven their mettle time and time again with revolutionary advancements across the BFSI sector. Now, as these shadow banks look to take on a greater role of service to the Indian consumer, it is imperative that they get the necessary support to effectively work toward the goal of making India a trillion-dollar economy.


Asees Mehtab

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