RBI keeps a close eye on the arbitrariness of NBFC, Deputy Governor said this regarding the action

By Sudhakar Yadav February 9, 2024 6:07 PM IST
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Non Banking Financial Companies (NBFC) The Reserve Bank of India (RBI) is keeping a close watch on the arbitrariness being done by it. Reserve Bank of India Deputy Governor M Rajeswara Rao said on Friday that NBFCs giving small amount loans misuse the freedom given by the regulator on interest rates and charge higher interest rates. He expressed displeasure at the direct lending platforms, saying that some of their business activities are not in line with the licensing guidelines, and made it clear that such violations are not acceptable. Let us tell you that most of the NBFCs charge very expensive interest from the customers. Due to this, many people are trapped in the debt trap.

It is not right to ask for a bank license

Reserve Bank of India Deputy Governor M Rajeshwar Rao on Friday said it is unnatural for non-banking financial companies (NBFCs) to seek bank licenses. Rao said this is because NBFCs already enjoy some regulatory benefits. Speaking at an event of industry body CII, Rao also talked about the demand for NBFCs to convert into banks and said that NBFCs get some benefits. Rao said, NBFCs have evolved as specialized companies performing specific economic functions and it is unnatural for them to seek to become like banks.

Bajaj Finserv Chairman put forth the demand

Interestingly, this comment came just after the speech of Sanjeev Bajaj, Chairman and Managing Director, Bajaj Finserv. Bajaj in his speech had said why not think about bank licenses for at least some NBFCs, especially those that have completed 10 years and met the compliance requirements. To this, Rao said that the regulator had invited applications for universal bank license a few years ago, but no unit got approval for it. He said that RBI is not in favor of allowing more number of NBFCs to accept deposits. He said that not a single new license has been given and the number of deposit accepting NBFCs has come down from 200 to only 26.

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