Large NBFCs can become banks: RBI

The Reserve Bank of India has said that there is a case for systemically important non-banking finance companies (NBFCs) beyond a certain size to convert into banks and subject them to the same prudent regulatory framework. This arrangement will enable a regulation-light structure to continue for most NBFCs that gives them the flexibility to serve the last-mile consumers.

“The spill-over of risks from a systematically important NBFC capable of transmitting perceptible impact on financial stability must be dealt with in a proportionate manner. So, NBFCs with significant externalities and which contribute substantially to systemic risks must be identified and subjected to a higher degree of regulation,” said RBI deputy governor M Rajeshwar Rao..