‘RBI keeping close watch on systemically important NBFCs’ | Business Line

‘RBI keeping close watch on systemically important NBFCs’ | Business Line

My VIEW:

December
22, 2015
RBI
and NBFCs
This refers to the report
‘RBI keeping close watch on systemically important NBFCs’ (The Hindu Business Line, December 22). During
all of its 80 plus years of existence, Reserve Bank of India has been
performing the role of protector of India’s financial sector, much beyond its
mandated role and assuming for itself a developmental role additional to the
normal core functions of central banks elsewhere. The role played by RBI in
institution-building in the financial sector and its outreach to the grass-root
level in the matter of financial inclusion may not have many comparable
international models.
This approach on the part
of RBI has had an impact on its resources including manpower and while RBI has
to own up for the weaknesses of the financial sector, it has not been getting
adequate support from the government or other stakeholders. NBFCs, cooperatives
and microfinance institutions (MFIs) may need regulatory and supervisory
support which may not be amenable to technology-enabled solutions which may
work in more developed countries. By the time off-site financial statements
show signs of incipient weaknesses in such institutional arrangements, it may
be too late and remedy may lie in more frequent on-site inspections and
scrutiny of books.
The number 15 which is
the percentage of NBFCs’ assets to scheduled commercial banks’ total assets is
not small, as all the private sector banks together have just about 25 per cent
in India’s banking business. The earlier GOI and RBI wake up to the concerns
expressed by RBI Deputy Governor in this speech, the less will be the damage to
the Indian financial sector that can be caused by sick NBFCs.


M
G Warrier, Mumbai 

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