RBI deputy governor urges NBFCs to bolster risk controls, board oversight

NBFCs should not lose sight of fairness to the customer even as they pursue scale, speed, and profits, Swaminathan added

Indian non-bank finance firms must step up oversight of liquidity and credit risks while strengthening board-level controls, a central bank deputy governor said, warning that weak governance could amplify vulnerabilities during market stress or liquidity shocks. 

"Asset-liability mismatches, nature and tenor of the funding sources, and concentration risks all need board-level oversight which should be ably supported by robust internal controls," Swaminathan J, said at a conference of NBFCs on March 28. The copy of the speech was uploaded on the central bank's website on Thursday. 

NBFCs should not lose sight of fairness to the customer even as they pursue scale, speed, and profits, he added. 

"Financial inclusion cannot be used as a pretext for financial exploitation," he added. 

He also urged statutory auditors to closely monitor the adequacy and effectiveness of NBFCs' internal controls. 

The deputy governor's comments come after IndusInd Bank , the fifth largest Indian private bank, said last month it expects a 2.35 per cent decline in its net worth as of December 2024 due to discrepancies in its derivative accounts found during an internal review. 

IndusInd Bank's disclosure lapses have led to questions of governance, audit oversights and risk management policies of lenders. 

Audit findings must lead to timely and meaningful corrective action, not remain confined to meeting minutes, Swaminathan said, urging close scrutiny of complex structures, derivatives, off-balance sheet items, related-party transactions, and provisioning policies. 

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