nbfc ” entails a very wide meaning. nbfcs include not just the finance companies that the general public is largely familiar with ; the term also entails wider group of companies that are engaged in investment business, insurance, chit fund, nidhi, merchant banking, stock broking, alternative investments, etc. as their principal business. today i would be concentrating only on those nbfcs that are under the regulatory purview of the reserve bank. 17. traditionally, india has had a bank - dominated financial sector. even so, there have always been nbfcs. these were in early times small family run businesses for deposits acceptance and lending activities. even today, the sector may be “ small ” as compared to banking sector with a total asset size of just around 14 percent of that of scheduled commercial banks ( other than rrbs ). however, there is no denying that the sector has grown tremendously over the years in size, form and complexity, with some of the nbfcs operating as conglomerates having business interests spread to sectors like insurance, broking, mutual fund and real estate. concomitant with the above, interconnectedness and systemic importance of the nbfc sector also have increased. 18. nbfcs being financial intermediaries are engaged in the activity of bringing the saving and the investing community together. in this role they are perceived to be playing a complimentary role to banks rather than competitors, as it is a known fact that majority of the population in the country do not yet have access to mainstream financial products and services including a bank account and therefore the country needs institutions beyond banks for reaching out in areas where banks ’ presence may be lesser. thus nbfcs especially those catering to the urban and rural poor namely nbfc - mfis and asset finance companies have a complimentary role in the financial inclusion agenda of the country. further, some of the big nbfcs viz ; infrastructure finance companies are engaged in lending exclusively to the infrastructure sector and some are into factoring business, thereby giving fillip to the growth and development of the respective sector of their operations. thus nbfcs have also carved niche business areas for them within the financial sector space and are also popular for providing customized products like second hand vehicle financing, mostly at the doorstep of the customer. in short, nbfcs bring the much needed diversity to the financial sector thereby diversifying the risks, increasing liquidity in the markets thereby promoting financial

financial crises. the imf ( laeven, valencia, 2012 ) finds that over the period 1970 to 2011 the world ’ s economies were confronted with a total of 218 currency crises, 66 sovereign debt crises and 147 banking crises. authors show that dealing with crises causes high economic costs. they find cumulative output losses of 32. 9 % of gdp in advanced economies originating from banking crises, an increase in public debt levels by another 21. 4 % of gdp and cumulated fiscal costs ( i. e. fiscal outlays directed to the restructuring of the financial sector ) in the order of 3. 8 % of gdp. given these enormous costs related to banking crises, there seems to be a change of paradigm since the beginning of the current crisis in 2008, with a tendency to return to increase the degree of financial regulation and with a more active use of fiscal policies in order to counteract or avoid banking crises in advanced economies. while the euro area member states were protected against currency crisis by their common currency throughout the current crisis, as mentioned earlier, some eu member countries were, however, affected by banking and subsequently sovereign debt crises. in response to these developments, the eu has substantially strengthened its economic and fiscal governance over the past years, with the enhanced stability and growth pact and the newly created macroeconomic imbalances procedure. furthermore, with the aim to prevent banking crisis for the future, the eu is currently preparing to establish a banking union, which will comprise the single supervisory mechanism ( ssm ) and the single resolution mechanism ( srm ). i am confident that the completion of the banking union will contribute to break the negative feedback cycle between sovereign and banking - sector problems. bis central bankers ’ speeches concluding remarks the continuing global economic turmoil underscores the importance of the fund as a forum for multinational dialogue as well as of its financing capacity also for the coming years. the unprecedented joint crisis management, undertaken by the imf together with europe, over the past few years has served the common goal of stabilizing the european economy which helped to stabilize the world economy. moreover, this cooperation between the imf and europe can possibly be seen as a blueprint for future cooperation between the fund and regional financial arrangements. looking ahead, the imf ’ s longstanding surveillance function should remain at the core of its activities and will have to be even further developed. given the increasing interconnectedness of economies in the world, the fund ’ s policy advice on how to address policy spillovers