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India to closely monitor shadow lending sector: FM Sitharaman

Reuters     July 7, 2019

India will closely monitor its shadow lending sector, the finance minister said on Saturday, a day after announcing the RBI would get much more regulatory authority over non-banking financial companies (NBFCs).

Prime Minister Narendra Modi's government, in the budget for the fiscal year ending March 31, 2020, on Friday announced credit guarantees to support NBFCs in a move aimed at boosting lending and reviving a sagging economy.

The government has tried to address issues such as liquidity and solvency at NBFCs, Finance Minister Nirmala Sitharaman told a news conference, adding that New Delhi plans to give the central bank powers to regulate the sector as well as to resolve problems plaguing it.

India has over 10,000 registered NBFCs lending to millions of households who may not have the creditworthiness to borrow directly from a commercial bank.

NBFCs borrow much of their money from banks, mutual funds and via debt sales but after defaults by Infrastructure Leasing & Financial Services (IL&FS) last year borrowing costs have surged and the sector has come under greater scrutiny.

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