NBFCs seek RBI rethink on revolving credit curb
India's top non-banking finance companies (NBFCs) are urging the Reserve Bank of India (RBI) to reconsider its plan to ban revolving credit products, according to sources familiar with the matter. A meeting was held on August 14 to discuss this issue, and the NBFCs plan to formally represent their concerns through the Finance Industry Development Council this week.
The restriction could impact credit products worth over Rs 2 lakh crore and hinder access to finance for micro, small, and medium enterprises (MSMEs) and individuals, the sources said. The NBFCs argue that the proposed prohibition lacks a clear regulatory basis or supervisory concern, and that nearly 90% of the products in question serve MSMEs and individuals without demonstrating adverse credit behavior or high credit costs.
The regulator issued the draft amendment on August 6, proposing that NBFCs be allowed to offer only term loans. The industry contends that the ban would create a regulatory advantage for banks, potentially leading to higher interest rates and charges for borrowers.
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