Non-banking financial companies (NBFCs) should be allowed to raise funds through external commercial borrowings and foreign currency convertible bonds, which they would lend to infrastructure projects, Assocham today said.
Currently, NBFCs account for nearly 12% of advances of the total financial system and can play a major role in furthering financial inclusion, the chamber said.
In some ways, NBFCs are better alternatives to conventional banks for meeting various financial requirements of small business enterprises and micro-finance institutions, it added.
"They offer quick and efficient services without the complex procedures of conventional banking," it said, adding, "A healthy growth of NBFC sector cannot be achieved on the back of unviable borrowing rates".
NBFCs engaged in funding of commercial vehicles, infrastructure assets, retail financing, loan against shares, funding of plant and machinery and SMEs financing.
NBFCs "should be allowed access to international and other sources of borrowings at competitive rates in the interest of overall credit system," it said.
There are 12,630 NBFCs registered with the Reserve Bank of India providing credit delivery in asset financing and hire purchase.