The number of deposit-taking NBFCs has fallen to a record low of 34 in FY23, from 69 in pre-pandemic FY20, and 254 a decade ago, as per data from RBI’s Handbook of Statistics on the Indian Economy for FY23.

“Number of NBFCs collecting deposits decreased consistently due to the changed norm of acceptance of deposits,” the central bank said in the notes. The sharpest fall was in FY19, when the number of deposit-taking NBFCs more than halved to 81 from 168 in the previous year.

RBI has been cautious in allowing NBFCs to public deposits citing the objective of protection of depositors’ interest. In August 2017, then Deputy Governor N.S. Vishwanathan had said that the central bank is not in favour of allowing NBFCs to accept deposits, and will not be giving more licences in the future.

Only NBFCs and HFCs, registered with RBI as deposit-taking entities, can accept public deposits. This includes only those entities that have an investment grade rating. The RBI has not allowed any new NBFC to accept public deposits for more than 15 years.

However, faced with the vacuum created by the merger of Housing Finance Development Corporation with HDFC Bank, there are increasing voices in the industry to allow more NBFCs to accept public deposits.

Diversifying fundraising

In a meet with Governor Shaktikanta Das in August 2023, heads of the top NBFCs of the country are said to have sought the RBI to grant more deposit-accepting licences. This was in response to the central bank’s concerns regarding NBFCs’ high reliance on bank borrowings and the need to diversify their fundraising.

Piramal Enterprises Chairman Ajay Piramal in an interview also said that if RBI allows certain NBFCs to accept public deposits, it will reduce the dependence on bank borrowings.

Banks’ exposure to NBFCs has risen 35.1 per cent year-on-year to ₹14.2 lakh crore as of June 2023, as per RBI data. In turn, NBFCs’ share in overall bank credit increased to 9.9 per cent from 8.5 per cent a year ago.

Total public deposits of NBFCs accounted for a small portion of their borrowings, at ₹85,256 crore as of March 2023. The amount of outstanding deposits has steadily increased from ₹50,022 crore at the end of FY20 and ₹7,085 crore at the end of FY13.