Mumbai - Non-banking financial companies (NFBCs) need to focus more on medium and small enterprises, the returns from which are much higher than from large corporates to whom NBFCs have much larger exposure, the Reserve Bank of India (RBI) said.
The RBI also asked NBFCs to meet the legitimate funding needs of the micro, small and medium enterprises (MSMEs).
"NBFCs are trying to be the mirror image of banks, as much of your lending now is towards large corporate and your lending to MSMEs is not much, where you get better margins," RBI Chief General Manager (department of non-banking supervision) P. Vijaya Kumar said at an event here organised by the Indian Merchant Chamber.
"This is despite the fact that by lending to large corporates NBFCs are getting lower returns than what they would have got from by lending to MSMEs," he said.
"When you are lending, you cannot give on money to everybody. You need to finance those activities that are relevant. If you look at global value chains and get finance done then you won't get into any losses," he added.