RBI asks NBFCs to strengthen governance standards

In a meeting with MD''s and CEO's  of upper layer non-bank lenders, the apex bank discussed risks associated with high credit growth in retail segment, particularly in unsecured lending space.
FILE - Image of the Reserve Bank of India logo, used for representational purposes only. (Photo | AFP)
FILE - Image of the Reserve Bank of India logo, used for representational purposes only. (Photo | AFP)

MUMBAI: Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday asked non-banking financial companies (NBFCs), including housing finance companies, to strengthen governance standards and assurance mechanisms.

The Governor held a meeting with the MD & CEOs of select large NBFCs. Government NBFCs and housing finance companies (HFCs) also participated in the meeting, the RBI said in a statement.

These entities constitute 50% of the total assets of NBFCs, including HFCs.Acknowledging the important role played by the sector in delivering credit to the unbanked and underserved areas, Das advised that NBFCs and HFCs need to remain alert to avoid any complacency during good times.

“The Governor highlighted the need for further strengthening the governance standards and assurance mechanisms viz. compliance, risk management, and internal audit in these entities,” the central bank said.

Discussions were held on diversifying the resources for NBFCs and HFCs to contain increasing reliance on bank borrowings; risks associated with high credit growth in the retail segment mostly unsecured; and prioritizing the upgradation of IT systems and cyber security.

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