Responsible lending essential for NBFC’s,says FM Sitharaman

Ira Singh
Khabar Khabaron Ki,10 July’25

Union Finance Minister Nirmala Sitharaman on Wednesday urged non-banking financial companies (NBFCs) against misusing financial inclusion as a cover for exploitative practices, urging the sector to prioritise responsible lending and uphold fair recovery norms.Speaking at the NBFC Conclave in New Delhi, Sitharaman asserted that “financial inclusion cannot be used as a pretext for financial exploitation,” and emphasised the importance of building a sustainable, transparent, and customer-centric credit ecosystem.“Lending must be tailored to a borrower’s genuine needs and repayment capacity, rather than being aggressively pushed,” she said. Sitharaman underscored the importance of fair pricing, transparent disclosure of fees, and the elimination of hidden charges or convoluted terms that could burden borrowers.

Addressing concerns over recovery practices, the finance minister called for greater empathy and adherence to the Reserve Bank of India’s Fair Practices Code. “Growth must not come at the cost of the customer’s well-being,” she said, urging NBFCs to balance business expansion with ethical conduct.Highlighting the growing significance of NBFCs in India’s development journey, Sitharaman said the sector must fortify its risk management frameworks. She urged firms to ensure that lending decisions are data-driven, aligned with financial capacity, and closely monitored for asset-liability mismatches, short funding tenors, and credit concentration risks.

The minister noted that NBFCs have expanded rapidly, with gross loan advances doubling from ₹24 lakh crore in 2021 to ₹48 lakh crore as of March 2025. Several large NBFCs, she added, now meet governance and compliance benchmarks comparable to banks—positioning them to potentially evolve into full-scale lenders.Urging full digital adoption across the loan lifecycle, Sitharaman proposed setting a minimum common technology standard for all registered NBFCs to ensure operational consistency and accountability. She also advocated for institutionalising and expanding bank-NBFC partnerships, particularly in the co-lending space, to strengthen credit delivery.

The minister’s address comes amid growing concerns over borrower distress and aggressive recovery tactics in some segments of the NBFC sector, even as it continues to play a pivotal role in deepening credit access across underserved regions.