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Das alerts NBFCs against high unsecured retail credit growth

RBI Governor Shaktikanta Das held a meeting with the MDs and CEOs of select large Non-Banking Financial Companies (NBFCs), including Government NBFCs and Housing Finance Companies (HFCs) in Mumbai. These Entities constitute nearly 50% of the total assets of all NBFCs including HFCs.
The Governor in his opening remarks complimented the NBFCs and HFCs for their improved financial health and operational resilience in recent years. While acknowledging the important role played by the sector in delivering credit to the unbanked and underserved areas, the Governor advised that the NBFCs and HFCs need to remain alert to avoid any complacency during good times. The Governor highlighted the need for further strengthening the governance standards and assurance mechanisms viz., compliance, risk management and internal audit in these entities.
Discussions were also held on diversifying the resources for NBFCs and HFCs to contain the increasing reliance on bank borrowings; risks associated with high credit growth in retail segment mostly in unsecured; prioritising the upgradation of IT systems and cyber security; strengthening Balance Sheets with improved provisioning cover; monitoring of stressed exposures and slippages; ensuring robust liquidity and asset-liability management; ensuring reasonableness and transparency in pricing of credit; and adherence to Fair Practices Code including robust grievance redress mechanism.
RBI Deputy Governors M. Rajeshwar Rao and  Swaminathan J., Managing Director, National Housing Bank (NHB), S. K. Hota, and other senior officials were present at the meeting.

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