The growing significance of NBFCs was also recognized by the second Narasimham Committee (1998) as well as by the RBI in its Discussion Paper on Harmonisation of the Role and Operations of DFIs and Banks. Recognizing the increasing significance of the sector, the Working Group on Money Supply (Chairman: Dr. Y.V.
The choice was made in view of the specific technical nature of banking and the complementary nature of prudential supervision and the protection of competition.