“Going forward, we will work towards greater harmonisation of the regulations to bring down the number of categories within the NBFC sector,” Mr. Gandhi said at an event organised by industry body, the Confederation of Indian Industry.
The central bank is aligned to the developmental needs of the economy and therefore will continue to approve of new kinds of NBFCs if the economy requires them, he said. RBI is actively studying the peer-to-peer lending arrangements that are slowly gaining traction, he added.
“We are studying peer-to-peer lending and we will come out with the discussion paper. Already the Securities and Exchange Board of India has come out with the similar kind of paper,” Mr. Gandhi said. The central bank is looking at another category of NBFCs — NBFC account aggregates for which the announcement was made this July, he said. NBFC account aggregates will provide technology-enabled solutions to a person to view at one place the position of financial assets across institutions under different regulators, he said, adding that “guidelines for the same are under preparation”.
He also said RBI, based on demand, is looking at revisiting the norms relating to core investment companies.
The business model of NBFCs is inherently risk-prone because of “weaker underwriting standards, enhanced risk-taking capabilities and increased complexities of their activities,” he said.
Besides these risks, he said, NBFCs are also exposed to key risks emanating from regulatory gaps, arbitrage and contagion effects.
They are also more prone to systemic risks due to concentration of exposure to specific sectors. Total number of NBFCs came down from 51,929 in 1997 to 11,769 in September 2015, while their asset size grew from Rs. 75,913 crore in December 1998 to Rs.16 trillion (Rs.16 lakh crore) in September 2015.
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