NBFCs to move towards becoming a Bank

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NBFCs to move towards becoming a Bank

The Reserve Bank of India panel is planning to allow the shadow lenders and non-banks having assets more than Rs. 50,000 crore to turn into a bank. The change will bring in more positive changes for the Non-banking finance companies. The bank has more benefits and facilities that they can provide their customers with. This move of RBI has come to be accepted happily as the bank keeps looking at the large swathes of the unbanked population of the country. The increase in the number of regulatory oversight in the shadow lenders during the IL&FS and DHFL is also something The Reserve Bank of India has in mind.

According to the proposal that RBI’s internal working panel had put forward on November 20, the companies who have assets ranging more than that of Rs. 50,000 crore and have been in business for at least 10 years are eligible and can make the shift from an NBFC to being a Bank. Experts however have shared the worry that not all of these eligible NBFCs have the right sources and assets to become a full-service bank. The number of benefits provided and the financial stability of the NBFCs will help RBI make the right choice and choose which of these have the ability to function as a full-service bank. If the license is provided, it would be the first-ever since IDFC and Bandhan Bank were given the license in 2014.

A lot of people have the concern that this move might not be entirely best and good for the financial stability of the Country. The NBFCs are not sure if this move will take care of the core systemic issues that they face. One of the heads of an NBFC told a media channel that the Universal Bank licenses that RBI is providing might not be the answer to everything. The example of Lakshmi Vilas Bank (LVB) was put forward to explain that a failure might break people’s trust and cause a disaster for all the other Banks and especially the NBFCs.

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