NBFCs should not take risk beyond their absorption capacity, says RBI

Swaminathan emphasises fair lending, recovery practices

The Reserve Bank of India’s deputy governor, Swaminathan J, asked non-banking finance companies (NBFCs) not to take risk beyond their absorption capacity, while adopting fairness in lending and recovery, supported by a robust grievance redress mechanism, on Friday.

 

Speaking at a conference for large-sized NBFCs in Chennai, Swaminathan emphasised that risk-taking must be prudent and well-planned, and never beyond the risk absorption capacity of the entity concerned.

 

“Deputy governor exhorted the NBFCs to proactively adopt fairness in lending and recovery supported by a robust grievance redress mechanism,” the Reserve Bank said in a statement.

 

He also conveyed expectations from auditors on maintaining audit rigour and adhering to the highest standards of objectivity, transparency, and ethics.

 

The conference was part of a series of supervisory engagements that the Reserve Bank has been having with key stakeholders of its regulated entities. The theme of the conference was ‘Shared Vision, Shared Responsibility: Strengthening the NBFCs’. The conference was attended by over 200 participants.

 

Chairpersons of the audit committee of the board (ACB), managing directors and chief executive officers, and the statutory auditors of NBFCs attended the conference.

 

Executive directors in charge of the regulatory, supervisory, and enforcement functions of the Reserve Bank also participated in the conference.

 

The president of the Institute of Chartered Accountants of India (ICAI) emphasised the contribution needed from the chartered accountancy profession and urged members to live up to the trust reposed in them. He touched upon various initiatives taken by the institute in capacity building of chartered accountants, especially with respect to the adoption of technology in auditing.