New Delhi: The task force on Non-Banking Financial Companies (NBFCs) that was carried out by industry association Ficci, has recommended the urgent need for an Insurance Regulatory Development Authority (IRDA)-type of developmental authority that will unfetter NBFCs from stifling regulations and stimulate their growth, with the larger objective of achieving financial inclusion in the economy.
The development of NBFCs will help develop rural and semi-urban segments of India, increase investment in agriculture, develop self-employment opportunities, create equal employment opportunities and economically empower women and backward groups.
According to the task force, it is important to recognise the fact that proximity to customers, knowledge of customer needs, efficient credit delivery methods, setting up cost-effective distribution networks, and the innovativeness are the hallmark of NBFCs. This was informed by the task force chairman M.S. Verma, former chairman, SBI & TRAI.
“These attributes are crucial in bringing about holistic economic development, with sufficient dispersion of risk amongst all financial sector entities. It is, therefore, imperative that regulation and development of NBFCs are in tandem in order to provide right environment and help the sector perform to its optimum potential”, he added.
The report states that a regulatory policy for NBFCs should look at the wider canvass that take cognisance of the role and relevance of the sector in view of the need for financial inclusion and effective credit delivery mechanisms, removing inequitable restrictions and creating a level playing field vis-à-vis banks.
Besides, it should establish a long-term framework enabling players in the sector to evolve long-term strategies to ensure stable growth and less likelihood of crisis and lead to closer consultation with representative bodies while formulating new regulations.
The development of NBFCs will help develop rural and semi-urban segments of India, increase investment in agriculture, develop self-employment opportunities, create equal employment opportunities and economically empower women and backward groups.
According to the task force, it is important to recognise the fact that proximity to customers, knowledge of customer needs, efficient credit delivery methods, setting up cost-effective distribution networks, and the innovativeness are the hallmark of NBFCs. This was informed by the task force chairman M.S. Verma, former chairman, SBI & TRAI.
“These attributes are crucial in bringing about holistic economic development, with sufficient dispersion of risk amongst all financial sector entities. It is, therefore, imperative that regulation and development of NBFCs are in tandem in order to provide right environment and help the sector perform to its optimum potential”, he added.
The report states that a regulatory policy for NBFCs should look at the wider canvass that take cognisance of the role and relevance of the sector in view of the need for financial inclusion and effective credit delivery mechanisms, removing inequitable restrictions and creating a level playing field vis-à-vis banks.
Besides, it should establish a long-term framework enabling players in the sector to evolve long-term strategies to ensure stable growth and less likelihood of crisis and lead to closer consultation with representative bodies while formulating new regulations.
Source: The Tribune
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