IMPACT OF NBFCs ON INDIA'S ECONOMIC GROWTH

Indian economy today is observing a phase of phenomenal growth. The country has seen year on
year growth rate of about 8-9 per cent in the last 3-4 years. Financing requirement are also rising
commensurately and will continue to increase in order to support and sustain the tremendous economic
growth. As will all know, NBFCs have been playing a complementary role to the other financial
institutions including banks in meeting the funding needs of the economy. They help fill the gaps in the
availability of financial services that otherwise occur fin bank-dominated financial systems. Equally
importantly, NBFCs provide competition for bank in the financial services domain. In fact, diversification
of financial markets is an important component of financial sector reforms. As mentioned in the C.M.
Vasudev committee Report on NBFCs, meeting the financing needs of all sectors of the financial system
needs products and institutions which are in a position to absorb these risks. It is an established fact that
the development of financial intermediaries contributes strongly to economic growth; and that
contribution is increased where intermediation is provided through a balanced combination of NBFCs
and banks-in particular, there is a strong correlation between the depth and activeness of non-banks and
stock markets on the one hand, and economic development on the other. RBI reports on banking Trends
have recognized the role played by the NBFCs.