Upper-layer NBFCs should be allowed to accept deposits, say CEOs

India’s leading non-banking financial companies (NBFCs) have said that allowing well-governed, upper-layer NBFCs to accept public deposits would help diversify their funding base, and reduce dependence on banks at a time when regulatory oversight and funding constraints are tightening.

- BS REPORTER

(From left) Raul Rebello, MD & CEO, Mahindra Finance; Umesh Revankar, executive vice-chairman, Shriram Finance; Sudipta Roy, MD & CEO, L&T Finance; Rajiv Sabharwal, MD & CEO, Tata Capital; and Jairam Sridharan, MD & CEO, Piramal Finance

In a panel discussion moderated by Manojit Saha of Business Standard, Rajiv Sabharwal, managing director and chief executive officer (MD & CEO) of Tata Capital, emphasised that diversification of liabilities is now critical for the stability and competitiveness of NBFCs.

“A good portion of our liabilities does come from banks. But a large opportunity has opened up in bonds, dollar bonds, and ECBs (external commercial borrowings) — that’s now over 10 per cent of our liabilities. Public deposits would be another low-cost, stable source that helps reduce the linkage to bank funding,” he said.

Sabharwal said that while the Reserve Bank of India (RBI) has in recent years encouraged NBFCs to reduce reliance on bank borrowings, access to public deposits has remained frozen for nearly two decades now. “It has been 15-20 years since any new NBFC has received a deposit-taking licence,” he said. “If a start can be made, especially with upper-layer NBFCs and some thresholds in place, it would be a welcome step. Given the rising credit demand in the country, such access would amplify credit flow and support growth,” Sabharwal added.