Reserve Bank of India (RBI) top brass will soon meet chiefs of select non-banking finance companies (NBFCs) in the backdrop of their credit growth outstripping banks’ credit growth and their growing reliance on external funding.
The meeting will be part of the Central bank’s series of engagement with the Boards and Senior Management of its Regulated Entities.
NBFCs’ gross advances rose by a robust 21.1 per cent year-on-year (y-o-y) as at September-end 2025 against Scheduled Commercial Banks’ (SCBs) gross advances growth of 11 per cent, per the latest Financial Stability Report (FSR). This Report is a half-yearly publication of all financial sector regulators.
Within gross advances, consumer segment advances of NBFCs were up by 21.3 per cent y-o-y as at September-end 2025 against SCBs’ growth of 16.8 per cent.
Flagging the growing reliance of NBFCs on external funding, the FSR noted that this has increased the NBFC sector’s susceptibility to exchange rate volatility, which could partly erode the benefits of lower funding costs in periods of stress. Notably, close to 86 per cent of the foreign currency borrowings are hedged.
Key concern
The report noted that the growth in non-bank financial intermediaries (NBFIs: NBFCs, including microfinance institutions and housing finance companies; mutual funds; insurance and pension funds; development finance institutions; and other financial intermediation activities) and their increasing interlinkages with the banking system is a key concern globally. In India too, banks asset exposures to NBFIs are rising.
In his meeting with the chiefs of Public Sector Banks and select Private Sector Banks last month, RBI Governor Sanjay Malhotra asked them to avoid complacency and remain vigilant in a dynamic environment.
The aforementioned cautionary note came even as he emphasised that there has been a steady improvement in the health and operations of the banking sector in 2025.
Published on January 4, 2026
