NBFCs are key to India's growth story

The sector has played a critical role in the development of infrastructure, transport and the support system for economically weaker sections

Remember the days when moneylenders were charging exorbitant interest rates and dictating terms to the borrower despite having all the security in place? Unlicensed moneylenders used to inhabit the rural neighbourhood without any regulation, leading to pricing inefficiencies. Spotting an opportunity, chit fund companies (regulated by states) and Nidhi companies (regulated by the Ministry of Commerce) also mushroomed. For the past decade or so we have seen that space being occupied by the Reserve Bank of India (RBI)-regulated non-banking financial companies (NBFCs) aiming to bridge the gap in pricing inefficiency based on perceived risk. NBFCs largely depend on market based