RBI asks NBFCs for broad fundraising, to reduce dependence on banks

Deposit growth also picked up, although it lagged behind credit growth.

The Reserve Bank on Wednesday asked non-banking finance companies to base their fundraising broadly to limit dependence on banks, while calling for strengthening balance sheets and protection against fraud and data breaches.

According to the RBI's 'Trend and Progress of Banking in India 2022-23' report, the Indian banking system and NBFCs remain healthy and resilient, supported by high capital ratios, which strengthen asset quality and robust earnings growth.

The consolidated balance sheet of scheduled commercial banks (SCBs) has grown by 12.2 percent during 2022-23, driven by lending to retail and services sectors. Deposit growth also picked up, although it lagged behind credit growth.

Looking ahead, the report said, “Given the increasing interconnectedness between banks and NBFCs, the latter should focus on broadening their funding sources and reducing over-reliance on bank financing. Both banks and non-banks need to bring more empathy into their customer service.” .

The joint efforts of all stakeholders are needed to protect the banking and payment system from the risks of fraud and data breaches posed by cyber threats, the report said.

“Overall, banks and NBFCs need to further strengthen their balance sheets through robust governance and risk management practices to meet the growing ambitions of the Indian economy,” the report said.

According to the report, the improvement in banks' asset quality, which started in 2018-19, continued in 2022-23, and even in the first half (April-September) of 2023-24, the gross non-performing assets (GNPA) ratio stood at 3.2 percent.

Higher net interest income and lower provisions boosted net interest margin (NIM) and profitability in 2022-2023, the report said.

First print: December 27, 2023 | 5:20 PM IST