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Capital relief alone can’t fix the cracks in India’s fragile NBFC system
The RBI’s decision to reduce risk weights on NBFC lending to operational infrastructure projects — aligning them with banks — is part of a wider wave of 2025 reforms.
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R Suryamurthy - Wed, 12, Nov 2025
- 23:02 EST
- 18
Reserve Bank of India. / RBI
The Reserve Bank of India’s (RBI) latest easing of capital norms for non-banking financial companies (NBFCs) is being touted as a pro-growth reform to accelerate credit and boost infrastructure financing. But even as regulators celebrate the potential of freed-up capital, analysts warn that the policy gloss conceals a deeper structural problem: India’s shadow banking sector is increasingly fragile, and capital relief alone will not fix it.
The RBI’s decision to reduce risk weights on NBFC lending to operational infrastructure projects — aligning them with banks — is part of a wider wave of 2025 reforms aimed at reviving credit growth. Earlier in the year, the central bank had rolled back higher risk weights on bank loans to NBFCs, eased project finance provisioning, and expanded co-lending partnerships between banks and non-banks.
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