The number of NBFCs accepting deposits has fallen to a record low of 34 in FY23 from 69 pre-pandemic in FY2020 and 254 a decade ago, according to the Reserve Bank of India’s Statistical Manual of Indian Economy FY2023. .
“Due to changes in deposit-taking norms, the number of deposit-taking non-bank financial institutions continued to decline,” the central bank said in the report. The biggest decline was in fiscal 2019, when the number of deposit-taking non-bank financial institutions fell from 168 in the previous year. more than half, down to 81.
The Reserve Bank of India has been cautious in allowing non-bank financial institutions to disclose deposits in order to protect the interests of depositors. In August 2017, then deputy governor NS Vishwanathan said that the central bank was not in favor of allowing non-bank financial institutions to accept deposits and would not issue more licenses in the future.
Only NBFCs and HFCs registered as deposit-taking entities with the Reserve Bank of India can accept deposits from the public. This includes only those entities with investment grade ratings. The Reserve Bank of India has not allowed any new NBFC to accept deposits from the public for more than 15 years.
- Also read: RBI places 15 NBFCs in upper tier under size-based regulation
However, facing the vacuum created by the merger of Housing Finance Development Corporation and HDFC Bank, the industry is increasingly demanding that more NBFCs be allowed to accept deposits from the public.
Heads of the country’s top non-bank financial institutions are said to have sought more deposit-taking licenses from the RBI during a meeting with Governor Shaktikanta Das in August 2023. This was in response to the central bank’s concerns over non-bank financial companies’ high reliance on bank borrowings and the need to diversify their financing.
Ajay Piramal, chairman of Piramal Enterprises, also said in an interview that if the Reserve Bank of India allows certain NBFCs to accept deposits from the public, it will reduce dependence on bank borrowings.
Banks’ exposure to NBFCs rose 35.1% year-on-year to Rs 1,420 crore as of June 2023, according to RBI data. In turn, the share of non-bank financial institutions in total bank credit increased to 9.9% from 8.5% a year ago.
Total public deposits of non-banking financial companies, a small portion of their borrowings, stood at Rs 85,256 crore as of March 2023. The amount of outstanding deposits has grown steadily from Rs 50,022 crore at the end of FY2020 and Rs 7,085 crore at the end of FY13.