NBFCs were supposed to fill the financial gaps left by banks. In the aftermath of the 2008 financial crisis, government had special focus on NBFCs. Two reasons: One, Banks have strict rules with respect to lending while NBFCs can be lenient.
Two, It is much easier to get NBFC license than Bank license. To give impetus to economic growth after 2008 financial crisis, government focused on excessive lending. Loans on phone calls was hallmark of that era. Roots of today's bad loans can be traced back to that period.
Therefore, NBFCs were promoted. Just like Cooperative banks, most of the NBFCs were either owned or controlled by politicians. NBFCs gave powerful people easy access to public money. As expected, under patronage of politicians soon NBFCs became instruments of corruption.
NBFCs devoured Lakhs of crores of public money, weakening the financial structure of the country. Well known examples are IL&FS and DHFL. It also led to trust deficit between public and banks.
Even after surfacing of so many cases of frauds in NBFCs, government is preferring NBFCs over banks. Banks for nothing from government as Corona relief but given excess workload. On the other hand, NBFCs were given liquidity relief of rs. 50,000 crores.
This government is mishandling public money. Public will soon realize it. My only fear is that this realization may take violent shape. No government is powerful enough to face the anger of more than 100 crore people. I hope this government wakes up soon.
#StopPrivatisation
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