State Bank of India (SBI) has proposed capping the lending base of non-banking financial firms (NBFCs) to the Reserve Bank of India (RBI). Many NBFCs currently borrow money simultaneously from more than 50–60 lenders.

The biggest bank in the nation feels that having a lot of lenders greatly dilutes the capacity to keep an eye on the loan books of NBFCs. Today, almost all NBFCs have a significant number of banks serving as their lenders. Our capacity to do due diligence is often hampered by a liability mix of up to 50-60%, according to a top SBI officer. SBI didn't reply to FE's questions until they were published in the media.

The senior official clarified that although a single NBFC has loans from several banks, these institutions hardly ever interact or have meetings to discuss the borrower's performance.

Their concerns are also based on the fact that, despite a significant decline, NBFCs' non-performing assets (NPA) remain elevated. According to the RBI's December 2023 financial stability report, the gross non-performing assets (NPA) ratio of non-bank financial companies (NBFCs) decreased from a peak of 7.2% in December 2021 to 4.6% in September 2023.

Furthermore, there are unlisted NBFCs whose data is also sometimes unavailable. According to a second source, "it will be difficult for anyone to know if there is any stress building up." He continued by saying that instances such as Infrastructure Leasing & Financial Services (IL&FS) and the former Dewan Housing Finance Corp (DHFL) have amply demonstrated the possibility of a domino effect in the event that they fail.