Shirish Chandra Murmu, Deputy Governor, RBI
As credit growth speeds up, so does the risk to asset quality, even as growth must never come at the cost of underwriting standards, RBI Deputy Governor Shirish Chandra Murmu cautioned non-banking finance companies (NBFCs) and housing finance companies (HFCs).Referring to past liquidity events, which showed how exposed NBFCs and HFCs can be to shifts in market sentiment and funding concentration, he emphasised that strong liquidity risk management is not optional. “Lenders need rigorous stress testing, early-warning systems and dynamic provisioning. AI and machine learning tools should be used more to detect early signs of borrower stress. Let me be clear: Growth must never come at the cost of underwriting standards.” Murmu said at the 7th Edition of the Confederation of Indian Industry’s NBFC & HFC Summit..He underscored that strong liquidity risk management is not optional and recent episodes in some advanced economies are reminder of this.“Entities must diversify their funding sources. A deep, liquid corporate bond market will help, and we will keep working with market participants to build one. Securitisation should also grow beyond a liquidity tool — into a genuine way to transfer risk and free up capital, with proper skin-in-the-game and transparency rules,” he said.While highlighting that customer trust is fundamental to sustainable business, Murmu noted that the pace of innovation must never outpace the protection, especially of vulnerable customers.“Conduct regulation, grievance redressal and responsible lending remain top priorities for us. Our recent guidelines on conduct of recovery agent reflect this priority. In an age where feedback travels instantly, there is no substitute for public trust,” he said.Tech adoptionMurmu observed that technology adoption must keep deepening — from blockchain in supply chain finance to AI in fraud detection. But digitalisation brings cyber risk.“Cyber resilience must stay a top priority. Entities must invest in strong cyber-security to protect customer data and maintain trust. Innovation must serve both efficiency and fairness. It should not exclude vulnerable segments or add new risks. Above all, innovation must be responsible,” he said.Referring to various estimates, Murmu said substantial credit needs of MSME are still not met by the formal lenders today. That gap alone shows the scale of opportunity.“There are credit gaps in other segments as well. Technology can close these gaps. Some see this only as a shift from collateral-based lending to data-driven lending, including cash-flow based lending. I believe it is more than that. It is changing how financial services are delivered, and how risk is assessed and managed, across the entire lending chain,” he added.He noted that India’s credit system has, for decades, been centred around banks. Mobilising deposits and extending loans, banks played a key role in building the nation after Independence.“This bank-led model has delivered scale, stability and strong regulatory oversight. But it had also left some gaps — particularly in remote areas, in underserved segments, and in niche markets where standard, collateral-based lending did not work so perfectly.“NBFCs and HFCs have been filling these gaps as alternative lenders. They have moved from niche lenders to sophisticated, technology-driven institutions that now complement the banking system,” he said.NBFCs and HFCs assess creditworthiness using more than traditional metrics. They reach customers in remote areas and serve segments that banks often find hard to serve. Their flexibility, faster decisions and local knowledge have helped advance financial inclusion. Murmu emphasised that the numbers substantiate this claim. Today, NBFC credit is about 16.7 per cent of nominal GDP, up from 15.9 per cent a year earlier. It is about 27 per cent of the credit extended by Scheduled Commercial Banks, up from 26 per cent.Published on September 3, 2026
