The Standing Committee on Finance has expressed significant concerns over the use of bouncers for loan recovery by Non-Banking Financial Companies (NBFCs). According to reports from The Hindu BusinessLine, panel Chairperson Bhartruhari Mahtab stated that the issue was a major concern raised by members during deliberations. Speaking after the committee's meeting, Mahtab emphasized that the panel discussed gaps in NBFC functioning and sought the government's views on steps being taken to address them. As per The Hindu BusinessLine, Mahtab noted that today's deliberation focused specifically on NBFCs and highlighted the need for stronger regulatory mechanisms.
The committee highlighted the dramatic growth in NBFC investment over the past decade. As reported by The Hindu BusinessLine, Mahtab noted that investment in NBFCs has increased significantly from just 10% of deposits 15 years ago to 26% currently. This substantial growth necessitates stronger regulatory mechanisms, including regular regulatory intervention, grievance mechanisms, and proper monitoring of NBFCs. Mahtab emphasized that the increase from just 10% of deposits 15 years ago to the current 26% necessitates "a regular regulatory mechanism in place, a grievance mechanism in place and also proper monitoring relating to NBFCs," as reported by The Hindu BusinessLine.
The panel specifically addressed concerns regarding irregularities and fraud in NBFCs, particularly in small lending operations. According to The Hindu BusinessLine, Mahtab stated that the matter was discussed, especially regarding the large number of complaints involving small lending where bouncers are being used. This practice has emerged as the main cause of concern expressed by committee members during their deliberations. As per The Hindu BusinessLine, Mahtab noted that "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."
The committee stressed the need for regular intervention by the Reserve Bank of India (RBI) in larger NBFC operations. As reported by The Hindu BusinessLine, Mahtab noted that concerns exist at the larger level where substantial amounts of money are involved, requiring regular intervention from the regulator and proper monitoring. He emphasized that most NBFCs are interconnected, making strengthened monitoring mechanisms essential for proper oversight. As per The Hindu BusinessLine, Mahtab stated that "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."
The panel underlined the necessity for action in cases of regulatory lapses and strengthened oversight of the interconnected sector. According to The Hindu BusinessLine, Mahtab stated that as NBFCs raise funds from the market and remain interconnected, there is a necessity to strengthen the monitoring mechanism. The committee's recommendations focus on ensuring proper action when dereliction occurs and establishing stronger regulatory frameworks for the growing NBFC sector. Mahtab also emphasized that "so in that respect it is very much necessary that whenever there is some dereliction there is a need for proper action," as reported by The Hindu BusinessLine.
