RBI Flags Liquidity Management and Asset Quality as Key Pillars for NBFC Growth
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RBI Identifies Five Priorities for NBFCs and HFCs
Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu has outlined five critical areas that non-banking finance companies (NBFCs) and housing finance companies (HFCs) need to strengthen as the sector enters a new phase of growth: governance, liquidity management, asset quality, customer protection and digital transformation.
Murmu, speaking at a Confederation of Indian Industry (CII)-organised summit, said the opportunities for the non-banking sector remain significant, supported by India’s economic expansion, urbanisation, demographic trends and digital growth.
NBFC credit currently accounts for around 27% of the credit extended by scheduled commercial banks, up from about 26% a year earlier, highlighting the growing importance of non-bank lenders in India’s financial system.
Liquidity and Asset Quality Take Centre Stage
Murmu stressed that past liquidity events have demonstrated the vulnerability of NBFCs and HFCs to funding concentration, excessive dependence on short-term wholesale funding and wider financial-system linkages.
He called for stronger liquidity-risk management and diversification of funding sources, while noting that a deeper and more liquid corporate bond market could provide additional funding resilience.
Asset quality is another major concern as credit growth accelerates. The RBI deputy governor warned that faster lending should not come at the expense of underwriting standards. He recommended rigorous stress testing, early-warning systems and dynamic provisioning to identify and manage emerging credit risks.
Murmu also encouraged lenders to make greater use of artificial intelligence and machine learning to detect early signs of borrower stress.
Governance, Cybersecurity and Responsible Innovation
The RBI also highlighted governance and compliance as essential foundations for sustainable NBFC growth. Boards and senior management should establish a culture of ethics and sustained compliance as institutions expand.
Digital transformation, meanwhile, needs to be accompanied by strong cybersecurity and customer protection. Murmu said innovation should improve efficiency without excluding vulnerable customers or creating new risks.
The RBI’s message is therefore clear: NBFC growth must be built on resilience, sound underwriting, diversified funding and responsible technology adoption—not simply faster loan expansion.
The emphasis is particularly relevant as NBFCs increasingly move from being alternative lenders toward becoming specialised financial partners across India’s evolving credit ecosystem.