RBI official frowns upon NBFCs' rising exposure to large cos

The central bank also asked NBFCs to meet the legitimate funding need of MSMEs.

Published: 14th June 2018 12:28 AM  |   Last Updated: 14th June 2018 12:28 AM   |  A+A-

The Reserve Bank of India seal is pictured on a gate outside the RBI headquarters in Mumbai. (File Photo | Reuters)


MUMBAI: Concerned about the rising exposure of non-banking financial companies (NFBCs) to large corporates, a Reserve Bank official today asked these lenders to focus more on the medium and small segments where returns are much higher.

The central bank also asked NBFCs to meet the legitimate funding need of MSMEs.

"You (NBFCs) are trying to be the mirror image of banks, as much of your lending now is towards large corporate and your lending to MSMEs is not much where you get better margins," chief general manager (department of non-banking supervision) P Vijaya Kumar said at an IMC event here.

He lamented that MSMEs don't get the growth capital from NBFCs despite the many efforts by government and RBI towards the same.

This is despite the fact that by lending to large corporates NBFCs are getting lower returns than what they would have got from by lending to MSMEs, Kumar said.

He also asked NBFCs to be careful and rational in lending.

"When you are lending, you cannot give on money to everybody.

You need to finance those activities that are relevant.

If you look at global value chains and get finance done then you won't get into any losses.

" Further Kumar urged NBFCs to strengthen their risk management processes and not just focus on growth.



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