Nirmala Sitharaman expressed displeasure over NBFC loan recovery, saying that recovery should be done within the scope of humanity.

The Finance Minister also said that NBFCs have a big role in the journey of developed India 2047. These companies are providing financial services to farmers, small businessmen and ordinary families.

Finance Minister Nirmala Sitharaman has termed some methods of loan recovery of non-banking financial companies (NBFCs) as wrong and has clearly said that these should be avoided. Sitharaman said that the process of loan recovery should be within the scope of rules and humanity. Also, the interest charged by NBFC should also be reasonable. Also, all charges should be told to the customer in advance in a transparent manner.

The Finance Minister also said that NBFCs have a big role in the journey of developed India 2047. These companies are providing financial services to farmers, small businessmen and ordinary families.

The Finance Minister said that in view of global uncertainties, NBFCs will also have to pay special attention to risk management and liquidity control. She said that loans should be given only when the customer needs it and can repay it on time.

Future plans for the NBFC sector

The government wants the lending capacity of NBFCs to be equal to that of banks in the coming years. While currently NBFC loans are around 24% compared to bank loans, a target has been set to bring it to 50% by 2047. Also, half of the total loan of NBFC should be invested in high growth sectors like green energy, affordable housing and MSMEs.

Sitharaman also said that 20% of NBFC lending should be done in a co-lending framework with banks. She said that NBFCs should adopt digital technology 100%. For this, a common technology standard should be developed so that the services of all NBFCs can become transparent and fast.

Better coordination between banks and NBFCs is necessary

The Finance Minister called for better coordination between banks and NBFCs regarding co-lending. She said that co-lending platforms, uniform onboarding rules and interoperable systems should be developed, so that the customer gets a better experience.

Sitharaman said that now NBFCs are not just "shadow banks" but are part of strong regulation and governance. Some large NBFCs are following the same governance and compliance as banks.

She said that NBFCs have benefited from the recent steps taken by RBI to reduce the cost of funding, this benefit should be passed on to the customers. The government will give full support to the NBFC sector and their concerns will be heard on priority.