SBI Requests RBI To Limit NBFC Lender Pool

The State Bank of India (SBI) has urged the Reserve Bank of India (RBI) to impose a limit on the number of lenders for non-banking financial companies (NBFCs). Currently, many NBFCs have a wide array of lenders, often exceeding 50-60, which complicates effective monitoring of their loan portfolios, according to a senior SBI official.

The proliferation of lenders hampers the ability to conduct thorough due diligence on NBFCs, as communication and coordination among multiple lenders are often lacking. Despite a decrease in non-performing assets (NPAs) among NBFCs, concerns persist regarding the sector's overall NPA levels, which stood at 4.6 per cent as of September 2023, down from 7.2 per cent in December 2021, as reported by the RBI.

Additionally, the opacity surrounding unlisted NBFCs poses a challenge in assessing potential risks, with examples like Infrastructure Leasing & Financial Services (IL&FS) and Dewan Housing Finance Corp (DHFL) illustrating the contagion effect of NBFC failures.

To address these issues, SBI proposes the formation of lender consortia for large NBFCs to facilitate collective lending decisions. Moreover, a robust mechanism for ongoing monitoring of NBFC performance is deemed essential.

Efforts such as SIDBI's growth accelerator program for small NBFCs have been initiated but have yet to gain significant traction. Many stakeholders believe that broader participation from major banks or regulatory intervention is necessary to bolster such initiatives.

While the RBI has taken steps to mitigate risks associated with bank loans to NBFCs by increasing risk weights, there remains a consensus that further actions may be warranted.