Lok Sabha Question No. 1090 (UNSTARRED), answered on 2024-07-29
Subject: Loans from Non-Banking Financial Companies (NBFCs)
Ministry: FINANCE
Asked by: Shri Satpal Brahamchari

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO†1090

ANSWERED ON MONDAY, JULY 29, 2024/SHRAVAN 7, 1946 (SAKA)

## LOANS FROM NON-BANKING FINANCIAL COMPANIES (NBFCs)

## †1090 . SHRI SATPAL BRAHAMCHARI

Will the Minister of FINANCE be pleased to state:-

- (a) whether the Government has ever conducted an assessment regarding the total number of individuals who have taken loans from Non-Banking Financial Companies (NBFCs) and nationalized/commercial banks;
- (b) if so, the details thereof and if not, the reasons therefor;
- (c) whether the Government is aware that some non-banking financial companies are charging almost double rate of interest on the loan as compared to nationalized banks; and
- (d) if so, the details thereof and the steps taken thereon?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI PANKAJ CHAUDHARY)

- (a)  to  (d):  As  per  the  Reserve  Bank  of  India  (RBI)  inputs,  there  were  total  36,84,50,351  individual  loan accounts in Scheduled Commercial Banks (SCBs) as on 31.3.2024, while the corresponding data in respect of NBFCs is not maintained by it. However, the details of outstanding gross loans and advances of NBFCs and SCBs for the last three financial years are as under.

(Amounts in crore Rs.)

|       | As on 31.3.2022   | As on 31.3.2023   | As on 31.3.2024   |
|-------|-------------------|-------------------|-------------------|
| NBFCs | 29,99,717         | 34,77,545         | 41,01,224         |
| SCBs  | 1,27,50,006       | 1,47,57,129       | 1,75,08,086       |

Rate of interest charged by different regulated lenders like banks and NBFCs on loans and advances are as per their Board-approved policies and within RBI guidelines. It depends on various factors such as cost of funds, cost of operations, creditworthiness of the borrower, risk profile of borrowers, availability and type/quality of collateral, business strategy of the lender, market competition, expected return on equity, etc. These factors are not the same across all the lenders/ loans/ borrowers and hence, give rise to difference in interest rates charged by different lenders.

RBI has  deregulated  the  interest  rates  to  be  charged  by  NBFCs  on  their  loans  and  advances.  The  rate  of interest  charged  by  NBFCs  is  governed  by  the  terms  and  conditions  of  the  loan  agreement  entered  into between the borrower and NBFCs.  The regulations issued by Reserve Bank on interest rates on advances are aimed at ensuring fairness and transparency. As per the extant guidelines,  NBFCs are required to adopt an interest rate model taking into account relevant factors such as cost of funds, margin and risk premium, and determine the rate of interest to be charged for loans and advances. The rate of interest and the rationale for charging different rates of interests to various categories of borrowers has to be disclosed to the borrowers or customers  in  the  application  form  and  communicated  explicitly  in  the  sanction  letter.  Further,  Boards  of NBFCs are required to lay down appropriate internal principles and procedures in determining interest rates.