The focus on consumer protection is important because, as I said earlier, thousands of low income households are lured into fraudulent financial schemes by the promise of unviably high rates of interest. In the Reserve Bank’s view, deposit taking should eventually be restricted only to banks which are tightly regulated. Deposit collection by non-banking companies should be gradually minimized, and eventually eliminated.
Towards this endeavor, the Reserve Bank has been quite restrictive in authorizing NBFCs to collect deposits. Indeed the number of NBFCs allowed to collect deposits has come down from 1420 in 1998 to less than a fifth, 257, by 2013. Also deposit taking NBFCs comprise only about 2 per cent of the total number of NBFCs registered with the Reserve Bank.