Why do NBFCs want to raise retail deposits from RBI?

NBFCs seek to raise retail deposits to create a level playing field and improve monetary policy transmission.

What are the current restrictions on NBFC deposits?

Most NBFCs cannot accept retail deposits, and those that can face limits on amounts and terms.

What is the RBI's main concern about NBFC deposits?

The RBI's primary concern is the lack of deposit insurance for NBFC deposits, unlike bank deposits.

Home / Business and Economy / NBFCs Seek RBI Nod for Retail Deposits

NBFCs Seek RBI Nod for Retail Deposits

7 Jan

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Summary

Large NBFCs want RBI to allow retail deposit collection.
Currently, only a few NBFCs can accept retail deposits.
Regulator hesitant due to lack of deposit insurance.

Large non-banking finance companies (NBFCs) have formally requested the Reserve Bank of India (RBI) to allow them to accept deposits from retail investors. This plea aims to establish a more competitive landscape among financial institutions and enhance the effectiveness of monetary policy rate transmission.

Currently, the privilege of collecting retail deposits is restricted to a select group of NBFCs possessing legacy licenses, such as Bajaj Finance, Shriram Finance, and Mahindra Finance. The RBI's apprehension stems from the fact that bank deposits are insured by the DICGC up to Rs 5 lakh, a safeguard absent for NBFC deposits.

NBFCs permitted to take deposits operate under strict regulations, including limits on deposit amounts and mandated tenure periods. Despite these restrictions, retail deposits constituted approximately 12.5% of resources for NBFCs-D as of March 2025. Some industry leaders acknowledge that deposit management requires specific skills and trust, suggesting only a few NBFCs possess the necessary capabilities.