RBI, NBFCs Discuss Revolving Credit: Focus on Risk & Compliance

Reserve Bank of India officials recently met with senior executives from non-banking finance companies (NBFCs). The discussions centered on proposed draft guidelines for revolving credit facilities and underscored the critical importance of strong internal compliance and risk management practices.

Strengthening Regulatory Frameworks and Risk Management

The central bank urged NBFCs to proactively identify and address risks that emerge from new products and evolving business models at an early stage. Maintaining robust internal audit and compliance frameworks is crucial, especially for products experiencing rapid growth.

The RBI is also working to align the NBFC regulatory framework with international standards. This initiative aims to enhance the overall stability and resilience of the financial sector.

Clarifying SRO Roles and Digital Compliance Directives

Discussions also clarified the function of Self-Regulatory Organisations (SROs). The RBI stated that SROs should act as the industry’s primary line of defense, promoting compliance and managing emerging risks, rather than operating as parallel regulators.

Furthermore, NBFCs received advice to enhance their consumer grievance redressal mechanisms to ensure timely and effective resolution of customer complaints. Given the increasing reliance on technology and digital channels, the RBI stressed full compliance with its digital lending framework and the Digital Personal Data Protection Act.

This ongoing engagement highlights the Reserve Bank of India’s increasing scrutiny of potential risks. These risks stem from the rapid expansion of lending products and technology-driven business models within the NBFC sector.