Whalesbook
Large non-banking finance companies (NBFCs) have formally requested the Reserve Bank of India (RBI) to grant them permission to raise deposits from retail investors. This move, aimed at creating a more equitable operating environment, was communicated to RBI Governor Sanjay Malhotra during a closed-door meeting on Monday.
The Funding Disparity
Most NBFCs are currently prohibited from accepting retail deposits, a core funding source for commercial banks. Only a select few, including Bajaj Finance, Shriram Finance, and Mahindra Finance, possess legacy licenses that allow them to solicit funds from the public. This disparity limits their access to stable, long-term funding.
RBI's Regulatory Hurdles
The central bank has historically resisted such demands from well-rated NBFCs. A primary concern for the regulator is the absence of deposit insurance, unlike the Deposit Insurance and Credit Guarantee Corporation (DICGC) cover provided for bank deposits up to ₹5 lakh. This lack of protection for depositors is a significant barrier to regulators approving new deposit-taking licenses for finance companies.
Existing Restrictions
NBFCs that are permitted to accept deposits operate under strict regulations. Retail deposits are capped at 1.5 times their net owned funds, and term deposits must have tenures between 12 and 60 months, with interest rates capped at 12.5% annually. As of March 2025, these retail deposits constituted only about 12.5% of total resources raised by NBFCs, with five major entities accounting for nearly 97% of aggregate deposits, according to the RBI's annual report.
Deposit Management Skills
Jairam Sridharan, MD of Piramal Finance, noted that while NBFCs seek stable liabilities, few would pursue a full banking license. He pointed out that managing customer deposits requires a distinct skill set focused on trust and robust governance, suggesting that only a handful of NBFCs possess the necessary capabilities.