Major non-banking finance companies have formally requested the Reserve Bank of India to permit retail deposit mobilisation, a move they believe would establish competitive parity with banks and enhance monetary policy rate transmission effectiveness.

High-Level Meeting with RBI Governor

The proposal was presented to RBI Governor Sanjay Malhotra during a closed-door meeting held on Monday. The session brought together chief executives of NBFCs, housing finance companies, microfinance institutions, and industry representatives to discuss sector-specific issues.

Currently, the regulatory framework restricts most NBFCs from accepting retail deposits, with only a select few companies holding legacy licences permitted to do so.

Current Regulatory Landscape

The existing deposit-taking framework shows significant restrictions on NBFC operations:

Among the few NBFCs authorised to accept retail deposits are Bajaj Finance, Shriram Finance, and Mahindra Finance. These companies operate under stringent regulatory oversight and face multiple operational constraints.

Regulatory Concerns and Challenges

The RBI has historically resisted expanding deposit-taking permissions to NBFCs, primarily due to consumer protection considerations. A key differentiating factor remains deposit insurance coverage.

"The critical issue here is that bank deposits, up to ₹5.00 lakh, are insured by DICGC or Deposit Insurance and Credit Guarantee Corporation, unlike NBFC deposits. That is one of the concerns preventing the regulator from issuing new deposit-taking licences to finance companies," explained an economist who requested anonymity.

This insurance gap creates a fundamental risk differential between bank and NBFC deposits, influencing regulatory policy decisions.

Market Concentration and Industry Dynamics

According to the RBI's annual Trend and Progress report, retail deposits represented approximately 12.50% of total resources raised by deposit-taking NBFCs as of March 2025. The market shows high concentration, with five major NBFC-Ds accounting for 96.90% of aggregate deposits in the sector.

Industry Perspective on Deposit Management

Jairam Sridharan, Managing Director of Piramal Finance, provided insights into the operational complexities of deposit management during a November 6, 2025 interview. He emphasised the fundamental differences between lending and deposit-taking operations.

"Few NBFCs have the skills to do deposit management. It's a very different ballgame than giving customers your money. Asking customers for their money requires trust and a certain level of fiduciary abilities internally in governance architectures," Sridharan noted.

He estimated that perhaps 10 to 12 NBFCs possess the necessary capabilities for effective deposit management, while the remaining approximately 9,500 NBFCs likely lack such operational expertise.

Implications for Financial Sector

The NBFC sector's push for retail deposit access reflects broader concerns about funding diversification and competitive positioning within India's financial services landscape. The outcome of these discussions could significantly impact how NBFCs structure their liability profiles and compete with traditional banking institutions for retail funding sources.

The Reserve Bank of India announced that the Supervisory Data Quality Index (sDQI) score for scheduled commercial banks has shown improvement in the September 2025 quarter. The index, which measures the quality of supervisory data submissions, recorded a score of 90.7 compared to 89.9 in the April-June period.

Understanding the Supervisory Data Quality Index

The RBI created the sDQI to provide a comprehensive assessment of data quality across four key parameters: accuracy, timeliness, completeness, and consistency in the submission of supervisory returns. The index serves as an objective tool to evaluate banks' adherence to the principles outlined in the RBI's Master Direction on Filing of Supervisory Returns 2024.

Performance Metrics and Scoring Framework

The September 2025 quarter showed notable improvement in banking sector compliance, with no entity scoring below the 80-point threshold. The RBI has established a clear scoring framework to categorize performance levels:

The improvement to 90.7 places the banking sector firmly in the "good" category, reflecting enhanced data management practices across institutions.

Scope and Coverage

The sDQI evaluation encompasses 87 scheduled commercial banks and focuses on their key supervisory returns. The assessment covers critical areas including:

• Asset quality reporting
• Risk-based supervision data
• Liquidity metrics
• Capital adequacy information

These returns form the foundation of the RBI's supervisory framework and are essential for effective banking regulation and oversight.

Regulatory Significance

The RBI emphasized that the sDQI provides a quantitative measure of supervisory data quality, which forms the basis for supervisory examinations. This systematic approach to data quality assessment enables more effective regulatory oversight and helps identify areas where banks may need to strengthen their reporting processes.

The consistent improvement in scores demonstrates the banking sector's commitment to maintaining high standards in regulatory compliance and data management practices.