RBI flags underwriting, asset quality risks in meeting with NBFC chiefs

MUMBAI: The Reserve Bank of India on Monday said governor Sanjay Malhotra met managing directors and chief executive officers of select non-banking financial companies (NBFCs), urging them to maintain sound underwriting standards and closely monitor asset quality. The meeting was part of the central bank’s ongoing engagement with regulated entities.

Malhotra also held discussions with government-owned NBFCs, housing finance companies (HFCs), microfinance institutions, and representatives of self-regulatory organisations, including Sa-Dhan, the Micro Finance Institutions Network and the Finance Industry Development Council. Together, the participating entities account for about 53% of total NBFC sector assets.

In his opening remarks, the governor highlighted the critical role NBFCs and HFCs play in facilitating credit flow, while emphasizing customer centricity, ethical conduct and responsible lending. He also underlined the importance of prompt grievance redressal to preserve confidence in the sector and support its orderly and sustainable development.

Participants shared feedback on policy issues and operational matters relating to the NBFC sector during the discussions, the central bank said in a statement.

The emphasis on underwriting discipline and asset quality monitoring comes amid concerns over emerging pockets of stress and aggressive lending practices in certain segments, including retail and micro, small and medium enterprises.

This was the first such interaction since 13 February 2025, when the Reserve Bank of India (RBI) last met with NBFCs, at a time when the regulator was closely tracking credit growth, asset quality trends and conduct-related issues across the financial system.

Deputy governors T. Rabi Sankar, Swaminathan J, Poonam Gupta and S.C. Murmu, along with the managing director and chief executive officer of the National Housing Bank, were also present at the meeting.

The engagement comes even as the RBI’s Financial Stability Report for December 2025 noted that NBFCs’ capital position remained strong, asset quality continued to improve and profitability stayed stable.

“Stress test results showed that, barring a few outlier NBFCs, the aggregate capital position would remain well above regulatory requirements under adverse shocks,” the report, released last week, said.

“Even as the GNPA ratio in NBFCs has declined, fresh accretions to NPAs are trending higher. Moreover, write-offs are also growing, indicating some build-up of stress in their loan portfolio,” the report said.