Based on supervisory data, in the quarter ended December 2021, the consolidated balance sheet of NBFCs grew at a faster pace than the corresponding period of the previous year. The bottom lines of the NBFC sector also improved in Q2 and Q3: 2021-22 with the second wave of COVID-19 subsiding.
With a strong capital buffer, adequate provisions and adequate liquidity in their books, NBFCs are poised for expansion. “Nevertheless, as the economy recovers, NBFCs need to be mindful of rising borrowing costs due to monetary policy normalization” a study titled “A Steady Ship in Choppy Waters: An Analysis of the NBFC Sector in” the authors said. Recent times” Published in latest reserve Bank of India Bulletin. The views expressed in this article are those of the authors and do not represent their views. reserve Bank of India,
Further, while NBFCs have largely realigned their business model by leveraging digital channels to improve new customer access and acquisition, this may prove to be a challenge for smaller NBFCs, who need to enhance their technological capabilities. Maybe, the authors said.
NBFCs also need to be more vigilant about cyber crimes. The study cautions that building on strong governance and risk management standards is another challenge to gain stakeholder trust.
But the sector’s asset quality declined in the third quarter of 2021-22, which can be partly attributed to the NBFCs that have been reeling under the IRACP norms, as well as the Resolution Framework for Individuals and Small Businesses – 2.0 Withdrawal of regulatory regime.
Bank-like regulatory initiatives like PCA and IRACP norms will further reduce the gap in regulation of NBFCs and banks. These regulations are expected to strengthen the NBFC sector in the times to come.