Parliamentary Panel Flags NBFC Loan Recovery Practices and Seeks Stronger Oversight

The Standing Committee on Finance has raised concerns over the deployment of bouncers for loan recovery by Non-Banking Financial Companies. Panel Chairperson Bhartruhari Mahtab emphasized the need for regular monitoring and a robust regulatory mechanism to address gaps in the sector.

A parliamentary panel has flagged the deployment of bouncers for loan recovery by Non-Banking Financial Companies (NBFCs), calling for stronger monitoring and regulatory oversight across the sector.

Speaking after a meeting of the Standing Committee on Finance, panel Chairperson Bhartruhari Mahtab stated that the issue was a major concern raised by members during recent deliberations. The committee discussed existing gaps in the functioning of NBFCs and sought the government's views on corrective measures.

Mahtab noted that investment in NBFCs has grown significantly over the years. According to his remarks, the share has risen from roughly 10 percent of deposits and finance fifteen years ago to 26 percent today. This substantial growth necessitates a regular regulatory mechanism, an effective grievance redressal system, and proper monitoring.

Addressing complaints of irregularities and fraud, Mahtab highlighted that small lending operations were particularly affected by coercive recovery practices. The use of bouncers for recovering small loans was noted as the primary cause of concern among committee members.

Beyond small-ticket lending, the panel also examined risks within larger, upper-tier NBFCs where substantial sums are involved. Mahtab stressed the necessity of regular intervention by the Reserve Bank of India (RBI) and closer monitoring, pointing out that many NBFCs operate in an interconnected network.

The committee underlined that appropriate action must be taken whenever regulatory lapses or derelictions occur. Because NBFCs raise funds directly from the market and remain financially interconnected, the panel concluded that strengthening the overall monitoring framework is essential to maintaining financial stability.

"The recent observations by the parliamentary panel highlight critical compliance and governance challenges within the NBFC sector. As non-bank financing continues to scale and form a larger share of market deposits, lenders must prioritize ethical recovery practices and robust internal controls. For fintech startups and digital lenders operating within this ecosystem, proactive adherence to regulatory guidelines and transparent grievance mechanisms are no longer optional, but essential for long-term sustainability and trust." — Dr. Shishir Gupta, Founder & CEO, StartupLanes