Shaktikanta Das calls for stronger Governance of NBFCs and HFCs

Reserve Bank of India (RBI) Governor Shaktikanta Das emphasised the importance of strong governance for Non-Banking Financial Companies (NBFCs) and Home Finance Companies (HFCs) during a recent meeting. He urged these lenders to remain vigilant and not become complacent, especially in good times. The meeting, attended by Deputy Governors M Rajeshwar Rao and Swaminathan J, along with senior officials from RBI and National Housing Bank (NHB), discussed various aspects of the industry.

Top executives of NBFCs and HFCs representing almost half of the total assets of all such financial entities were in attendance. Governor Das stressed the need to enhance governance standards, compliance, risk management, and internal audit functions. He also cautioned against the risks associated with the rapid growth of unsecured retail loans.

Due to the COVID-19 pandemic, the annual interaction between the RBI and NBFCs had been discontinued. However, this meeting aimed to re-establish that engagement. The conversation encompassed different facets of the industry, including aspects like growth, funding strategies, the notable rise in unsecured loans, and the sector’s readiness to handle potential shifts in the economic cycle.