RBI Deputy Governor calls on NBFCs, HFCs to diversify funding sources

Shirish Chandra Murmu, Deputy Governor of the RBI, has stressed the importance of diversified funding strategies for non-banking financial companies (NBFCs) and housing finance companies (HFCs) operating in India's financial services landscape. Speaking on sector resilience, Murmu highlighted that a varied approach to raising capital is essential for reducing concentration risk and ensuring stable operations during market uncertainties.

Securitisation of assets has emerged as a key tool in the RBI's recommendations for the sector. By converting loans and other receivables into tradable securities, NBFCs and HFCs can unlock capital tied up in their balance sheets and access broader investor bases. This approach not only improves liquidity positions but also distributes credit risk more effectively across the financial system.

Beyond funding mechanisms, the RBI official emphasised that stronger governance frameworks and sound underwriting practices form the bedrock of sector stability. Murmu underscored that robust risk assessment protocols and prudent lending standards are critical to maintaining asset quality and protecting depositors' and investors' interests. These measures collectively support sustainable growth while mitigating systemic risks.

The RBI's guidance reflects growing recognition that India's NBFC and HFC sectors require structural strengthening to support the nation's credit growth aspirations. As these institutions expand their reach into underserved markets, adherence to governance norms and conservative underwriting principles will determine their long-term viability and contribution to financial stability.