The Reserve Bank of India (RBI) has on Friday asked non-banking financial companies (NBFCs) to strengthen governance standards and assurance mechanisms like compliance, risk management and internal audit in these entities.
In a meeting with managing directors and chief executive officers of upper layer non-bank lenders, the apex bank discussed risks associated with high credit growth in retail segment, particularly in unsecured lending space. It also discussed the importance of upgrading information technology systems, strengthening balance sheets and monitoring stressed assets.
Apart from this, discussions were held on the need for non-bank lenders to ensure robust liquidity and asset and liability management, ensuring reasonableness and transparency in pricing of credit; and adhere to fair practices code including robust grievance redress mechanisms.
The top management of select housing finance companies and power finance companies were also present in the meeting. These Entities constitute nearly 50% of the total assets of the NBFC segment.
Apart from RBI Governor Shaktikanta Das, Deputy Governor M. Rajeshwar Rao, Deputy Governor Swaminathan J and the National Housing Bank Managing Director S K Hota were also present in the meeting.
Specifically, some NBFCs expressed concerns over the levy of a tax deductible at source on listed non-convertible debentures, and its negative impact on the secondary market, a source said. Some non-deposit taking NBFCs also requested the RBI to permit non-bank lenders to receive deposit licenses.
Henceforth, RBI plans to meet the top bosses of these non-bank lenders on an annual or a biannual basis.