In the light of recent banking crisis, discuss the necessity of Non-Banking financial companies in the banking sector and the importance of tightening norms of NBFCs. (200 Words )
Refer - Business Standard
Enrich the answer from other sources, if the question demands.
IAS Parliament 6 years
KEY POINTS
Necessity of NBFCs
· NBFCs supplement the banks by providing the infrastructure to allocate surplus resources to individuals and companies and produces competition in the financial services industry.
· It provides specialization one particular sector and develops an information advantage.
· Flexible services to meet the needs of the specific client.
· Enhances the competition through unbundling targeting and specialization.
Importance of tightening norms of NBFCs
· Enables RBI for reviewing the quality of assets.
· Helps in prevention of further Banking crisis like IL&FS.
· Suitable control over liquidity management by RBI.
· Transformation of balance sheets of NBFCs resulting in more equity capital and systemic stability in the financial sector.
