RBI Governor meets NBFC Heads and asks them to improve governance standards

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The Reserve Bank of India (RBI) Governor Shaktikanta Das met with senior executives of large non-banking financial companies (NBFCs) on August 25 to discuss ways to strengthen governance standards. The meeting was also attended by Deputy Governors M Rajeshwar Rao and Swaminathan J and the Managing Director, of National Housing Bank (NHB), SK Hota, besides a few senior officials of the central bank.

Das stressed the importance of having strong governance standards and assurance mechanisms, such as compliance, risk management, and internal audit.

He also urged NBFCs to reduce their reliance on bank borrowings and to prioritize the upgrade of their IT systems and cyber security.

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The meeting also discussed ways to strengthen balance sheets, ensure robust liquidity and asset-liability management, and ensure reasonableness and transparency in pricing of credit. NBFCs were also encouraged to adhere to the Fair Practices Code and to have robust grievance redress mechanisms in place.

The meeting was attended by RBI Deputy Governors M Rajeshwar Rao and Swaminathan J, as well as National Housing Bank Managing Director SK Hota.

Here are some specific actions that NBFCs can take to strengthen their governance standards:

  • Establish a clear and transparent governance structure with well-defined roles and responsibilities.
  • Implement robust risk management frameworks and internal controls.
  • Conduct regular audits and reviews of their operations.
  • Promote a culture of ethics and compliance.
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