AGENCY
NEW DELHI, Apr 10
Reserve Bank of India (RBI) Deputy Governor Swaminathan J said the non-bank finance firms must step up oversight of liquidity and credit risks while strengthening board-level controls.
He warned 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 Non-Banking Financial Companies (NBFCs).
NBFCs should not lose sight of fairness to the customer even as they pursue scale, speed, and profits, he added.
NBFCs have emerged as powerful engines of credit. By complementing the traditional banking system, they have significantly expanded access to credit, particularly for segments that have historically been underserved or excluded, he said. Through innovative credit delivery models that harness technology and local insights, NBFCs have been able to design customised financial products tailored to diverse borrower needs.
The Deputy Governor said their agility and close connect with customers have enabled them to play a role that is not only complementary to the role traditionally played by banks but, in many instances, catalytic in building a financial ecosystem characterised by deeper intermediation and wider opportunity. The DG highlighted that unfortunately, some NBFCs think they can pursue a business model where it is par for the course to resort to weak underwriting in pursuit of quick growth, coupled with excessive and unsustainable interest rates — at times masked as upfront charges or processing fees — which is followed by aggressive recovery practices upon default.
“Let me state unequivocally: this is not an acceptable model.”
”Financial inclusion cannot be used as a pretext for financial exploitation. I urge each one of you to commit your institutions to upholding fairness in all your dealings,” he believed.
