Chennai: The Federation of Indian Asset Financiers Associations (FIAFA), the apex body representing asset financing companies, has urged the Centre to create a separate regulatory framework for small non-banking financial companies (NBFCs) with a net worth of Rs 2 crore to Rs 100 crore and defer further hikes in minimum Net Owned Fund (NOF) requirements, saying tighter norms could restrict credit access for MSMEs, transport operators and first-time borrowers.FIAFA told TOI that it had submitted a memorandum to Union finance minister Nirmala Sitharaman, proposing a dedicated regulator under the finance ministry, a freeze on further increases in NOF requirements, and a high-level committee comprising representatives of the finance ministry and NITI Aayog to review the impact of regulatory changes on small-ticket credit delivery.The federation said the RBI’s “one-size-fits-all” approach failed to account for the limited systemic footprint of small, non-deposit-taking NBFCs, which play a key role in serving underserved borrowers in semi-urban and rural markets.These lenders primarily deploy promoters’ own capital and operate within local markets, bridging the gap between informal sources of finance and the formal banking system.FIAFA’s key concern is the phased increase in the minimum NOF requirement. The threshold, which remained at Rs 25 lakh for decades, was raised to Rs 2 crore in March 2017 and to Rs 5 crore in March 2025. It is scheduled to rise to Rs 10 crore by March 2027.For family-owned and regionally focused NBFCs, these thresholds are disproportionate to their size, risk profile and business models, the federation said, adding that higher capital requirements had already prompted significant exits from the sector.It cited the cancellation of around 1,701 NBFC registrations in FY18, attributing it largely to companies’ inability to meet the Rs 2-crore NOF requirement.FIAFA argued that regulatory tightening, partly driven by the RBI’s challenges in supervising thousands of entities, risked driving small lenders out of the market rather than improving risk management.It also rejected the suggestion that small lenders could operate under state money-lending laws, arguing that restrictive interest-rate caps, which it said could be around 9%, would render their business models unviable. Banks themselves lend to small businesses at substantially higher rates, it said.
