Fitch Ratings said on Wednesday that the proposed changes to the regulatory framework of non-banking financial institutions (NBFIs) are expected to improve the stability of the sector and their financing. “We believe the proposed reforms will preserve NBFI’s core business model and may improve funding prospects for some entities by strengthening investor confidence in the sector,” the rating agency said. The Reserve Bank of India had issued a discussion paper on 22 January offering a change in the regulatory framework for non-banking financial institutions (NBFIs) in India.

Proposed changes will improve governance and risk management

Fitch said the proposed changes would improve governance and risk management, however, the rating agency does not see these as key weak areas for NBFIs rated by Fitch. Fitch also stated that the long-term impact of such reform would depend on its implementation.

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If the implementation is better, it will open a new path for growth of this sector.

It is noteworthy that the regulatory draft recently presented for non-banking financial institutions, that experts are calling it dice-reverser for this sector. Experts say that if the implementation is better then it will open a new path for the growth of this sector. This will make it easier for NBFIs to raise cheap investment and give cheap loans. At present, due to expensive investment, they are far behind than banks.

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