RBI Deputy Governor Murmu Outlines 5 Growth Pillars For NBFCs As Credit Reaches 16.7% Of GDP

Non-banking financial companies (NBFCs) and housing finance companies (HFCs) must anchor their rapid balance sheet growth in prudent underwriting, diversified funding channels, and robust corporate governance, Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu stated at the Confederation of Indian Industry (CII) 7th NBFC and HFC Summit in Mumbai.

Murmu highlighted the increasing systemic footprint of the non-bank financial sector, noting that NBFC credit has expanded to approximately 16.7% of India's nominal gross domestic product (GDP), up from 15.9% a year earlier. In relative terms, credit extended by non-bank lenders now stands at roughly 27% of the total credit disbursed by scheduled commercial banks, compared with 26% in the previous year.

Five Pillars for Sustainable Sector Growth

Addressing senior industry executives, the Deputy Governor outlined five core areas that boards and executive leadership must prioritize to navigate emerging market risks and maintain systemic resilience:

• Governance and Culture: Boards and top management must cultivate a sustained culture of compliance, transparency, and ethics across all operations, ensuring supervisory controls scale in tandem with asset size.
• Liquidity Management: Lenders need to build resilient liquidity buffers and avoid funding mismatches, recognizing that market sentiment can shift abruptly during volatile credit cycles.
• Asset Quality and Credit Risk: Expanding loan books must not erode credit standards, necessitating proactive monitoring, dynamic provisioning, and comprehensive portfolio stress testing.
• Customer Protection and Fair Conduct: Fair treatment, transparent pricing, responsible lending practices, and responsive grievance redressal mechanisms must remain fundamental priorities.
• Digital Transformation and Cyber Resilience: As financial services shift to automated platforms, institutions must bolster data security, secure infrastructure against cyber threats, and practice responsible innovation.

Asset Quality and Underwriting Standards

The Deputy Governor delivered a direct caution regarding excessive credit momentum in retail and unsecured segments.

"As credit growth speeds up, so does the risk to asset quality... Let me be clear: growth must never come at the cost of underwriting standards," Murmu said.

To detect emerging stress before it turns into non-performing assets (NPAs), Murmu urged non-bank lenders to adopt artificial intelligence (AI) and machine learning tools, enhance early-warning signal mechanisms, and implement dynamic provisioning frameworks.

Diversifying Liability Profiles and Deepening Debt Markets

A central theme of the address was the over-reliance of NBFCs on bank borrowing and concentrated short-term funding routes. Murmu noted that past liquidity events have clearly demonstrated how vulnerable lenders become when dependent on narrow channels.

To build durable funding structures, Murmu urged the sector to actively support and access a deeper, more liquid domestic corporate bond market, emphasizing that the RBI continues to work with market participants to facilitate this development. Furthermore, he pointed out that securitization must mature from being merely a liquidity-generating tool into an effective mechanism for capital relief and true balance-sheet risk transfer, conducted under robust risk-retention ("skin-in-the-game") and disclosure frameworks.

Credit Gaps and Digital Public Infrastructure

While emphasizing regulatory prudence, Murmu underscored that the long-term outlook for India's shadow banking sector remains promising due to urbanization, formalization, demographic growth, and rising consumption.

He highlighted that NBFCs have evolved from alternative lenders to specialized financial partners capable of addressing credit gaps in supply-chain finance, infrastructure debt, affordable housing, vehicle loans, and gold- and silver-backed lending. Leveraging India's digital public infrastructure—including the Account Aggregator ecosystem and the Unified Lending Interface (ULI)—will allow specialized lenders to lower loan origination costs, speed up underwriting, and expand last-mile financial inclusion securely.

Tags: Reserve Bank of India NBFCs Housing Finance Companies Corporate Bonds Banking Sector CII