NBFCs key to Viksit Bharat, must ensure transparent, fair lending: FM
Addressing the NBFC Symposium 2025, organized by the department of financial services (DFS) in New Delhi, Sitharaman said interest rates must remain reasonable, rate cuts must be passed on to borrowers, and all charges must be clearly disclosed, free from hidden fees or complex terms.
"Lending should be based on genuine needs and repayment capacity of the customers...Loans should not be aggressively marketed or pushed," she said.
"Recovery practices of the NBFCs must be fair, empathetic and respectful and in strict accordance with the RBI's fair practices code," she added.
To be sure, some Non-Banking Financial Companies (NBFCs) have come under scrutiny for deploying recovery agents who resort to coercive and inhumane methods to collect personal loan dues.
Earlier in February, the Reserve Bank of India (RBI) Governor Sanjay Malhotra had also urged NBFCs to prioritize fair customer treatment and establish robust, time-bound grievance redressal mechanisms.
In a meeting with chief executives and managing directors of select NBFCs, Malhotra underscored the need to balance growth ambitions and prudent practices to safeguard customer interests, promote inclusive development, and ensure financial stability, according to reports.
Sitharaman, in her remarks on Tuesday, also highlighted that NBFCs remain an important component of the financial system with their ability to reach a vast cross-section of the population and diverse geographies, complementing the banking system.
"NBFCs have emerged as an important source of credit for segments that have historically been underserved or excluded," she said.
They fulfill a range of credit needs and are the first point of contact for millions of citizens and small businesses seeking financial empowerment, emerging as the preferred option for numerous underserved sectors, she added.
As things stand, the NBFC sector has demonstrated a strong recovery in asset quality and profitability since the pandemic.
Gross Non-performing assets (NPAs) have significantly decreased from 6.4% in March 2021 to 3% in March 2025, indicatingimproved asset health.
Concurrently, the sector's profitability, as measured by Return on Assets (ROA), has more than doubled, rising from 1.11% in March 2021 to 2.4% in March 2025.
Sitharaman underscored that building a strong, future-ready financial ecosystem hinges on deep collaboration between NBFCs and banks, especially public sector ones, noting that existing synergies—particularly through co-lending arrangements—have already yielded promising results.
"Going forward, such partnerships should be institutionalized and scaled," she said.
"A seamless digital co-lending architecture, common onboarding standards, and interoperable servicing platforms can greatly enhance credit flow to underserved sectors while ensuring risk-sharing and efficiency," she added.
Sitharaman also said that NBFCs are no longer 'shadow banks," given their regulation, oversight, and importance in the financial system and the broader economy.
"Recent regulatory measures such as the restoration of risk weights on bank lending and the easing of financial conditions are expected to further improve credit prospects, strengthening the overall funding environment for the sector," she added.
M. Nagaraju, secretary, department of financial services, said NBFCs play a vital role in driving inclusive economic growth—whether it's helping a farmer buy his first tractor or enabling a woman entrepreneur to own a sewing machine.
'You have taken credit to the last mile and shown what it truly means to serve Bharat, the real India beyond the metros,' he added.
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