RBI Deputy Governor Says NBFCs and HFCs Entering a New Phase of Growth; Highlights Credit, Digital Lending and Risk Management
September 3, 2026
India’s non-banking financial sector is entering a new phase of growth, with NBFCs and housing finance companies (HFCs) expected to play a larger role in financial inclusion, specialised lending and technology-driven credit delivery.
Speaking at the 7th NBFC & HFC Summit in Mumbai on September 3, 2026, RBI Deputy Governor Shri Shirish Chandra Murmu said a strong and diversified credit system will be essential for India’s journey towards Viksit Bharat.
He highlighted the growing role of NBFCs and HFCs in reaching underserved borrowers, financing specialised sectors and using technology to improve credit assessment and delivery.
NBFC Credit Expands as Share of Economy Rises
According to the RBI Deputy Governor, credit extended by NBFCs has increased to approximately 16.7% of India’s nominal GDP, compared with 15.9% a year earlier.
NBFC credit is now equivalent to around 27% of credit extended by Scheduled Commercial Banks, up from approximately 26% a year earlier.
The increase highlights the growing importance of NBFCs within India’s overall credit ecosystem.
While banks continue to dominate the financial system, NBFCs have increasingly filled gaps in areas where traditional collateral-based lending may not work efficiently.
MSME Credit Gap Offers Major Opportunity
One of the biggest opportunities identified by the RBI is MSME financing.
A substantial portion of MSME credit requirements remains unmet by formal lenders. According to Murmu, this credit gap demonstrates the scale of opportunity available to technology-enabled lenders.
The use of digital infrastructure and consent-based data sharing could allow NBFCs to evaluate borrowers using cash flows and alternative data, rather than relying predominantly on physical collateral.
This could particularly benefit MSMEs, microfinance borrowers and other underserved segments.
Digital Infrastructure Could Transform Lending
India’s digital public infrastructure is expected to play an increasingly important role in the next phase of NBFC growth.
The RBI Deputy Governor highlighted platforms and initiatives including:
- Pradhan Mantri Jan Dhan Yojana (PMJDY)
- UPI
- Aadhaar
- Account Aggregator framework
- Unified Lending Interface (ULI)
These systems can reduce the cost and time involved in credit assessment and loan disbursal.
The Account Aggregator framework and consent-based data sharing could provide lenders with better information about borrowers’ financial activity, potentially enabling more accurate credit decisions.
Specialised Lending Remains a Key Strength
NBFCs and HFCs have developed expertise across several specialised segments, including:
- Supply-chain finance
- Infrastructure finance
- Affordable housing
- Vehicle finance
- Gold and silver-backed lending
The RBI believes this sector-specific expertise can help lenders assess risks more effectively and design products around borrowers’ actual cash flows.
Co-lending between banks and NBFCs could further expand the reach of specialised credit.
RBI Says Regulation Must Support Sustainable Growth
The RBI Deputy Governor acknowledged that the NBFC sector has faced significant challenges, particularly around liquidity risk, asset-liability mismatches, wholesale funding dependence and interconnectedness with the broader financial system.
He compared the RBI’s regulatory role to building a strong foundation before constructing a tall building.
Over the past five to six years, the RBI has introduced several measures designed to strengthen the sector while supporting sustainable growth.
These include:
- Liquidity Risk Management framework for NBFCs
- Liquidity Coverage Ratio requirements
- Scale Based Regulation
- Stronger risk-management, compliance and internal-audit requirements
- Fraud risk-management guidelines
- Digital Lending guidelines
- Microfinance regulatory reforms
The Scale Based Regulation framework, introduced in 2021 and consolidated further in 2023, applies regulatory requirements according to the size, activities and risks of NBFCs.
RBI Eases Some Rules to Support NBFC Growth
The central bank has also introduced measures aimed at reducing regulatory friction and supporting expansion.
These include lower risk weights for certain infrastructure lending by NBFCs, greater flexibility for boards regarding related-party lending, inclusion of quarterly profits when calculating net owned funds and capital, and removal of prior approval requirements for branch expansion by larger NBFCs.
The RBI has also exempted certain small NBFCs that do not have public funds or customer interface and have assets below ₹1,000 crore from registration requirements.
The objective is to maintain proportionate regulation while allowing financially sound institutions to expand.
Five Areas RBI Wants NBFCs to Focus On
Looking ahead, Murmu identified five critical areas for sustainable growth.
1. Governance and Culture
Strong governance and an ethical compliance culture must remain the foundation of NBFC growth.
Boards and senior management need to ensure that compliance and risk management keep pace with the expansion of the business.
2. Liquidity Management
The RBI remains particularly focused on liquidity risk.
Past liquidity disruptions demonstrated the vulnerability of NBFCs to changes in market sentiment and concentration of funding sources.
The central bank wants NBFCs to diversify their funding base and reduce excessive dependence on particular sources.
The development of a deeper corporate bond market and greater use of securitisation could provide additional funding and risk-transfer mechanisms.
3. Asset Quality and Credit Risk
Rapid credit growth can eventually create pressure on asset quality.
The RBI therefore expects lenders to strengthen:
- Stress testing
- Early-warning systems
- Dynamic provisioning
- Credit underwriting
The Deputy Governor also encouraged greater use of AI and machine learning to identify early signs of borrower stress.
The key message was clear: credit growth should not come at the expense of underwriting standards.
4. Customer Protection
The RBI said customer trust must remain central to the growth of digital and technology-driven lending.
Responsible lending, grievance redressal and fair conduct will remain important regulatory priorities, particularly when serving vulnerable customers.
5. Digital Transformation and Cyber Resilience
NBFCs are expected to continue investing in technology, including AI for fraud detection and blockchain-based applications in areas such as supply-chain finance.
However, greater digitalisation also increases cyber risks.
The RBI therefore expects financial institutions to strengthen cyber-security and protect customer data as digital lending expands.
What It Means for NBFC and HFC Stocks
The RBI’s comments are broadly positive for the long-term growth opportunity in India’s NBFC and HFC sector.
The combination of economic growth, urbanisation, rising credit demand, MSME financing requirements and India’s digital infrastructure provides a large addressable market for specialised lenders.
At the same time, investors should not look only at loan growth.
The key metrics to monitor will be:
Credit growth → asset quality → NIMs → funding costs → capital adequacy → liquidity → return on assets.
Companies that can combine strong growth with disciplined underwriting, diversified funding and effective technology adoption could be better positioned to benefit from the next phase of India’s credit expansion.
Points to consider
The RBI’s message at the NBFC & HFC Summit was essentially one of “growth with responsibility.”
NBFC credit is becoming an increasingly important component of India’s financial system, while digital infrastructure is opening new opportunities to serve previously underserved borrowers.
However, the RBI wants the sector’s expansion to be supported by strong foundations — particularly governance, liquidity management, asset-quality controls, customer protection and cyber resilience.
For investors, the speech reinforces the long-term structural opportunity in India’s lending sector, but also highlights why quality of growth will be more important than growth alone.
Key investor themes: NBFC credit growth, MSME lending, affordable housing, digital lending, co-lending, securitisation, AI-based credit assessment, asset quality and financial-sector regulation.
Source: RBI Website