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Informist, Wednesday, Dec. 31, 2025

 

--RBI report: NBFCs resilient with better asset quality, healthy capital 

--RBI report:Stress tests reaffirm fincl cos resilient to losses in adversity

--RBI report: Propose risk based calculation of deposit insurance premium 
--RBI report: Non-life insurance facing surge in consumer grievances

 

MUMBAI – The non-banking financial company sector has remained resilient due to strong capital buffers, robust net interest margins, healthy profitability, and low asset impairments, according to the December edition of the Reserve Bank of India's Financial Stability Report Wednesday.

 

"Credit growth steadied, supported by improved funding conditions--bank lending to NBFCs increased--and lending to retail borrowers rose. Alongside, their credit costs continued to trend downward," according to the report. Non-banking financial companies continued to diversify their funding profile and remained the dominant source of funding.

 

"Easing money market rates and an increase in foreign currency borrowings have helped NBFCs steady the rise in the cost of funds," according to the report. But this growing reliance on external funding has also increased the sector's susceptibility to exchange rate volatility, which could erode the benefits of lower funding costs during periods of stress, as per the report.

 

The credit growth of non-banking financial companies in the upper and middle layers accelerated since March and was at 21.3% in September, mainly due to the conversion of two housing finance companies into upper-layer non-banking finance companies in March and June. But credit growth of middle-layer companies has continued to slow down.

 

On a sector-wise basis, credit growth of non-banking finance companies improved across broad economic sectors such as industry, services, and retail. However, growth was not seen in the agriculture sector where non-banking finance companies have minimal exposure. 

 

Stress test for credit risk under a baseline scenario showed the system-level gross non-performing assets ratio of 174 non-bank lenders may rise from 2.3% in September to 2.9% in September 2026, according to the report. "Consequently, their aggregate CRAR (capital to risk-weighted assets ratio) may dip from 22.8% to 21.7% during the same period," according to the report.

 

Meanwhile, consumer grievances in the life insurance sector declined to 120,000 between the financial year 2022-23 (Apr-Mar) and FY25, from 150,000 in FY22. "This stabilization in grievance volumes suggests improved market conduct and better alignment between product sales and customer expectations," as per the report.

 

In contrast, the non-life insurance sector is facing a significant escalation in consumer grievances with the number of reported grievances nearly tripling, from around 48,000 in FY21 to nearly 140,000 in FY25. "This increasing number of grievances underscores growing friction between policyholders and insurers, necessitating urgent intervention to address the root causes," according to the report.

 

As per the report, a risk-based premium model is proposed to be introduced to calculate deposit insurance premium. This will help banks that are more sound to save significantly on the premium paid. "At present, banks are charged a premium of 12 paise per INR 100 of assessable deposits," according to the report. "While the existing system is simple to understand and administer, it does not differentiate between banks based on their soundness."  End

 

Reported by J. Navya Sruthi

Edited by Rajeev Pai

 

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