NBFC Sector Anticipates Boost in Financial Inclusion and Digitalization in Upcoming Union Budget

Ahead of the Union Budget on July 23, the NBFC sector anticipates enhanced financial inclusion and digitalization efforts to drive growth. Industry leaders suggest establishing a refinancing body akin to the National Housing Bank and seek policies that support responsible credit utilization and greater access for underserved communities.

The Non-Banking Financial Company (NBFC) sector is hopeful for significant measures to enhance financial inclusion and digitalization in the upcoming Union Budget, scheduled for presentation on July 23. Industry representatives are urging the government to establish a special refinancing body similar to the National Housing Bank, which serves housing finance companies.

This year, the sector has faced stringent regulatory actions from the Reserve Bank of India (RBI). Speaking at a May event, RBI Deputy Governor Swaminathan J cautioned against an over-reliance on algorithm-based credit models. However, the RBI’s latest Financial Stability Report indicates that NBFCs remain well-capitalized, with a CRAR of 26.6%, a GNPA ratio of 4.0%, and a return on assets (RoA) of 3.3% as of March 2024.

Rakesh Kaul, CEO of Clix Capital, emphasized the importance of the forthcoming budget in promoting financial inclusion and digitalization to sustain sector growth. Echoing similar sentiments, Jitendra Tanwar, Managing Director & CEO of Namdev Finvest, highlighted the need for policy reforms to take advantage of global integration. Further, Krishan Gopal, CFO of Aye Finance, expressed confidence that the budget would lay the groundwork for India's development vision by 2047, recognizing the role of NBFCs in transforming micro-enterprise lending.

Mathew Muthoottu, MD of Muthoottu Mini Financiers, called for policies that promote responsible credit utilization and enhance access for underserved communities. Neha Juneja, Co-founder and CEO of IndiaP2P, pointed out the budget's potential to spur consumption and bolster NBFC growth serving priority sector clients. Pavitra Walvekar, CEO of Kudos Finance, advocated for additional funds to improve liquidity and regulatory reforms to streamline operations, ensuring long-term financial stability, particularly for MSMEs.