Finance panel raises red flag on NBFCs using bouncers for recovery

The Standing Committee on Finance has flagged concerns over Non-Banking Financial Companies (NBFCs) using bouncers for loan recovery. Chairperson Bhartruhari Mahtab stressed the need for a stronger regulatory mechanism and RBI intervention.

The Standing Committee on Finance has expressed concern over the use of bouncers for loan recovery by Non-Banking Financial Companies (NBFCs), with panel Chairperson Bhartruhari Mahtab saying the issue was a major concern raised by members during deliberations.

Regulatory gaps and need for monitoring

Speaking after the committee's meeting, Mahtab said the panel discussed gaps in the functioning of NBFCs and sought the government's views on steps being taken to address them. "Today we had deliberation on NBFC and there has been some concerns related to the gaps that exist and we wanted the government's view on the steps they are taking," Mahtab said.

He noted that investment in NBFCs has increased significantly over the years, making stronger regulation and monitoring necessary. "Some 15 years ago it was hardly 10% of the deposits and the finance and now it has gone up to 26%," he said, adding that the increase necessitates "a regular regulatory mechanism in place, a grievance mechanism in place and also proper monitoring relating to NBFCs."

Irregularities in small lending

On complaints of irregularities and fraud in NBFCs, Mahtab said the matter was discussed, particularly in the context of small lending. "It was discussed, especially large number of money is of small lending where the bouncers are being used and that is the main cause of concern which has been expressed by Honourable Members," he said.

Concerns over large, interconnected NBFCs

The panel also raised concerns involving larger NBFCs, where substantial amounts of money are involved, and stressed the need for regular intervention by the Reserve Bank of India (RBI). "But at the larger level which we have upper limit of NBFCs where large amount of money is involved, there also there is certain concerns and we need regular intervention from the regulator, from RBI and proper monitoring of this because most of the NBFCs are interconnected," Mahtab said.

He further underlined the need for action in cases of regulatory lapses and strengthening oversight of the interconnected sector. "So in that respect it is very much necessary that whenever there is some dereliction there is a need for proper action," he said.

Mahtab also said that as NBFCs raise funds from the market and remain interconnected, "there is a necessity to strengthen the monitoring mechanism." (ANI)

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