RBI Instructs NBFCs: Enhance Governance and Vigilantly Monitor Risks

India’s Non-Banking Financial Companies, or NBFCs, need to reinforce governance and assurance functions, and also ensure vigil against potential risks and vulnerabilities, Deputy Governor Swaminathan J. of Reserve Bank of India (RBI) said, while addressing a conference for Heads of Assurance Functions from select NBFCs. RBI Deputy Governor M. Rajeshwar Rao deliver the keynote address at the event held in Mumbai.

Among risks that constantly challenge NBFCs is the threat to cybersecurity, which in turn has a negative impact on operations and the institution’s financial situation, Swaminathan added.

RBI Executive Directors JK Dash, Rohit Jain, Saurav Sinha and SC Murmu also participated in the conference, along with senior officials of the Regulation and Supervision departments at India’s central bank. NBFC Heads spotted at the event included Chief Risk Officers, Chief Compliance Officers and Heads of Internal Audit. In all, nearly 280 professionals from over 100 NBFCs took part.

An RBI release stated Deputy Governor Swaminathan “inter alia highlighted cybersecurity and operational risks, credit risks from rule-based credit models; and liquidity risks” while addressing the conference on Wednesday. “He conveyed the Reserve Bank’s supervisory expectations from the regulated entities to ensure independent and meaningful assurance functions as well as fair and transparent conduct towards customers,” the press release added.

RBI Deputy Governor Rao spoke of how the NBFC sector had boosted progress and transformation in India’s financial landscape. He also focussed on how assurance functions were significant when it comes to issues including operational transparency, customer conduct and dependency on a third party, besides handling risks in operation.

The theme of the conference was ‘Resilient Financial System: Role Of Effective Assurance Functions’ and it was part of a series the RBI has been hosting over the past year to monitor functioning of its regulated entities. The Chief General Managers of RBI presided over the sessions on Assurance Functions at the event while Heads of Assurance Functions of the participating NBFCs made presentations to outline challenges they face as well as best practices in operations.