Non-banking financial companies need to diversify risks across sectors and geographies, as well as maintain capital adequacy norms and introduce core banking solutions going ahead, former
State Bank of India
NSE 0.66 % chairman Rajnish Kumar said. Kumar also said the risk-taking abilities of NBFCs are higher than banks, and that the regulatory stance will become tougher, with the regulation arbitrage between lenders and non-banking entities ceasing to exist.
“Regarding asset quality review (AQR) of lenders, as pointed out by former RBI governor Raghuram Rajan, the NPA problem started with the NBFCs. The whole issue boils down to risk management and governance.
“There is a need for NBFCs to take a diversified approach across sectors and geographies and also be mindful about the risk matrix,” he said during an event organised by micro-finance institution VFS Capital here on Friday evening.
Kumar said the NBFCs will have to maintain capital adequacy norms, introduce core banking solutions and make adequate disclosures by 2025. Regarding NPA in the banking sector, the former
SBI NSE 0.66 % chief said lenders cannot escape their share of the blame, adding that “faulty” government policies in “power, coal, telecom and road sectors” are also responsible for bad loans.
Source-https://economictimes.indiatimes.com/industry/banking/finance/nbfcs-should-diversify-risks-across-sectors-former-sbi-chairman/articleshow/92455179.cms