The Standing Committee on Finance, chaired by Bhartruhari Mahtab, has sought a government explanation on measures to address shortcomings in NBFC operations. Mahtab said concerns about coercive recovery methods featured prominently in the panel’s recent discussions.

The committee’s concerns extend beyond individual recovery cases. According to Mahtab, NBFCs’ share of the country’s deposits and finance has risen from around 10% to 26% over 15 years. That expansion has increased their importance to the financial system and the potential fallout when things go wrong.

The panel wants tighter regulation alongside a more effective route for customers to raise grievances. It is particularly concerned about physical force being used to collect small loans, viewing such practices as damaging to the financial industry’s reputation. It has also called for action where duties or rules are neglected.

Large NBFCs in the upper regulatory layer are another focus. Their links with banks and other financial institutions could allow trouble at one firm to spread. The committee therefore wants closer RBI monitoring and more frequent intervention. NBFC borrowing from the market also leaves investors exposed to fraud or irregularities.