The review comes at a time when non-banking finance companies (NBFC) are playing an increasingly important role in credit delivery, even as concerns around interconnectedness, unsecured lending and systemic risk remain in focus.
Under the SBR framework, NBFCs are subject to differentiated regulation based on their scale, risk profile and systemic importance. As of end-March 2025, 15 NBFCs-including four housing finance companies (HFCs)-were classified in the upper layer (NBFC-UL).
As a category, they are subject to more stringent regulatory requirements compared with entities in the middle layer (NBFC-ML) and base layer (NBFC-BL).
The sector remains concentrated at the top. The 15 upper-layer NBFCs accounted for 30.2% of total NBFC assets at end-March 2025. NBFCs in the middle layer held the largest share at 64.6%, largely due to the presence of government-owned entities, while base-layer NBFCs accounted for just 5.2% of total assets, despite being the largest segment in terms of number of entities.
NBFCs’ growing role in financial intermediation is evident in their expanding credit footprint. Credit extended by NBFCs rose to 14.6% of gross domestic product at end-March 2025 from 13.5% a year earlier. Their credit also increased as a share of outstanding loans of scheduled commercial banks, rising to 25.3% from 23.6% over the same period.
On the asset side, loans and advances grew by 19.4% at end-March 2025, with upper-layer NBFCs recording faster growth than those in the middle layer. Unsecured lending by NBFCs increased largely due to base effects, while the growth of secured lending moderated. This slowdown was primarily driven by NBFC-ML entities, where secured credit growth declined sharply to 15.8% at end-March 2025 from 29.9% a year earlier.