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RBI introduces principles for mid, large NBFCs
April 12, 2022
Reserve Bank of India (RBI) on Monday introduced certain principles, standards and procedures for mid and large non-banking financial companies.
The revised regulatory framework for NBFCs, gave in October 2021, had indicated that such entities in the Upper Layer (NBFC-UL) and Middle Layer (NBFC-ML) would be required to have an independent Compliance Function and a Chief Compliance Officer (CCO).
The central bank expressed that as a part of the overall structure for corporate governance, the compliance function serves a critical role.
“Accordingly, it has been decided to introduce certain principles, norms and techniques for compliance function in NBFC-UL and NBFC-ML, keeping in view the standards of proportionality,” it said in a circular on Monday.
NBFCs in the upper layer and center layer should treat the prescriptions in the circular as a set of minimum guidelines only and accordingly frame their guidelines taking into account their corporate governance framework, the scale of operations, risk profile, and organizational structure, among other factors, RBI said.
On scope and coverage of compliance function, RBI said that compliance function should ensure strict observance of all statutory and regulatory requirements for the NBFCs, including standards of market conduct, managing conflict of interest, treating clients fairly, and ensuring the suitability of customer service.
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