Some NBFCs growing aggressively without strong underwriting practices: RBI Governor

Some NBFCs are aggressively growing without building strong underwriting practices: RBI Governor

RBI Governor Shaktikanta Das has asked banks and NBFCs to carefully assess their unsecured loan exposure, and said that some lenders were aggressively pursuing growth without without building strong underwriting practices.

"Self-correction by NBFCs would be the desired option, though the RBI is keeping a close watch and won't hesitate to take action if required," said the Governor during his briefing on the decisions of the Monetary Policy Committee on October 9.

Governor Das said at some NBFCs, the retail targets are driving growth rather than the actual demand, and the regulator is 'closely monitoring' the incoming data on credit cards, MFI loans and unsecured loans.

Some of these NBFCs, including MFIs and Housing Finance Companies are chasing 'excessive' Returns on Equity, said Governor Das. Without generalising the entire NBFC space, Shaktikanta Das said there are 'outliers' who the regulator is engaging with on this.

RBI brought attention to this 'push effect' of targets by shadow lenders to drive growth, and highlighted that 'high indebtedness' could pose risk to the stability of the NBFCs.

RBI added that concerns arise when interest rates charged by the NBFCs become 'usurious'.

This is being updated.