Govt to work with regulator to ensure small NBFCs' compliance is proportionate: finance ministry official

On the green financing front, More said that NBFCs are uniquely positioned to break the last mile green finance gap.

The government will work with regulators to ensure that smaller non-banking finance companies' (NBFCs’) compliance is “supportive and proportionate”, Ashish Madhaorao More, joint secretary in the finance ministry, said on July 24.

Compliance has become a challenge, especially for the smaller NBFCs, as norms evolve. "We must ensure that NBFCs are not only compliant but also competitive and future-ready," he said. More was speaking at Assocham’s Non-Banking Finance Companies & Green Financing "Bouncing Back to Calibrated Growth” event in Mumbai.

Gross loans and advances of the NBFC sector, both upper and middle layer, stood at 24.98 percent of those of scheduled commercial banks in FY25, as against 21.84 percent in FY20.

Credit extended by NBFCs grew at 20 percent in FY25, higher than the overall bank credit growth, indicating the increasingly bigger role being played by these shadow banks in the Indian economy.

NBFCs are uniquely positioned to break the last-mile green finance gap, the official said. Whether it's financing rooftop solar panels for households and MSMEs, supporting electric vehicles adoption through accessible loans, promoting sustainable agricultural practices or backing key energy startups in Tier 2 and 3 cities, NBFCs can become catalysts of India's green transition.

More urged the NBFCs and stakeholders to share concerns and suggestions on the green finance, in terms of access to funds, regulatory clarity and capacity building.

"The government is committed to supporting you in overcoming all these hurdles, so that together we can fulfil the aspirations of a sustainable and resilient India. The sector must grow responsibly and sustainably, aligning with broader national priorities," he added.