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NBFC loans: Balancing growth and risk in a changing landscape

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The RBI has maintained its outlook that NBFCs are a vital catalyst for development of the Indian economy. However, it can be observed that various NBFCs have mushroomed in the market which aim to benefit from the growing demand in the retail sector where the consumers are gullible,
The article from Financial Express discusses the dynamic landscape of Non-Banking Financial Companies (NBFCs) in India, focusing on their growth, challenges, and the balance between expansion and risk management. It highlights how NBFCs have become crucial in providing credit to sectors underserved by traditional banks, thereby fueling economic growth. However, this growth comes with increased risk, particularly in terms of asset quality and liquidity. The article points out that regulatory changes, like the RBI's scale-based regulatory framework, aim to strengthen the sector by categorizing NBFCs based on their size and systemic importance, which influences their regulatory requirements. It also touches upon the need for NBFCs to diversify funding sources beyond bank loans, manage asset-liability mismatches, and enhance risk management practices to sustain growth while mitigating potential downturns. The piece concludes by emphasizing the importance of NBFCs adapting to technological advancements and maintaining robust governance to navigate the evolving financial landscape effectively.

Read the Full The Financial Express Article at:
[ https://www.financialexpress.com/business/banking-finance-nbfc-loans-balancing-growth-and-risk-in-a-changing-landscape-3695342/ ]