While a lot of speculations about Non-Banking Financial company (NBFC) is making rounds in media, Raman Aggarwal, Chairman, Finance Industry Development Council said that the sector is doing well and it’s an Ironman of the country’s financial sector.
To clear the stand of NBFC in the current financial scenario, he said, that the sector is growing well and recently it has been appreciated by the financial bodies world over like International Monetary Fund (IMF).
The sector has also been approached by the World Bank and we have signed the Memorandum of Understanding ( MOU) with them. They are keen not only to renew the partnership but also take a step forward to bring in the concepts and the provisions of the insolvency bankruptcy code. They also want to take up this opportunity to leverage the marketing leasing in India that unfortunately has suffered, he said.
Focusing on the growth of the sector, he said that, the average growth rate of the sector in past two-three years has been 15 percent at least and profitability has been going up by 20-30 percent.
The NBFC has grown up and become specialist in their own product line, and that is why they are able to withstand the turmoil.
There is always an opportunity in the crisis, Aggarwal said, citing one of the examples of NBFC delegates meeting the Prime Minister Narendra Modi which has never happened in the history. Because of this meeting, there was a huge rise in NBFC stocks.
After the meeting with the Prime Minister we also had a meeting with RBI Governor Shaktikanta Das, he said, adding that this process has opened the doors for one of the long standing demands of the sector, that is, to have a structural dialogue with the regulator or the ministries on a regular basis.
Though the sector is around 80 years old, there are certain landmarks where the real so-called “turmoil” happened. In 1997, some scams happened intentionally or unintentionally as the sector was unregulated, and a lot of people thought it’s an easy way to access public money, Aggarwal said.
That was an era when Reserve Bank of India (RBI) embedded an act and Chapter 3 (B) that talked about the regulation of NBFC came in. The period when RBI as a regulator came into the picture. It’s been 22 years, and the regulator is more active as compared to the sector. Because of this the NBFC sector today stands tall, he stated.
Talking about the “shadow banking system” which is the highlights of all pink newspapers, he said, it was in 2006, when the people started talking about the system, calling NBFC as shadow banks. The real difference between the shadow banks of the USA, China or other countries lies in the regulation. No banks are regulated like the NBFC in India.
On January 9, 2019, the RBI governor Shaktikanta Das categorically informed to drop this term shadow banking and to be no longer be used for NBFC.