“𝗥𝗕𝗜’𝘀 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸: 𝗔 𝗦𝘁𝗿𝗼𝗻𝗴𝗲𝗿 𝗙𝘂𝘁𝘂𝗿𝗲 𝗳𝗼𝗿 𝗡𝗕𝗙𝗖𝘀”
The RBI (Reserve Bank of India) is worried about a problem in the NBFC (Non-Banking Financial Company) sector. This problem is called “𝗿𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗮𝗿𝗯𝗶𝘁𝗿𝗮𝗴𝗲,” which means that some NBFCs are taking advantage of certain rules in a way that can harm the entire financial system.
To fix this problem and make sure the financial system stays stable and safe, the RBI has made some new rules. These rules are based on the size and importance of each NBFC. So, the bigger and more important an NBFC is, the stricter the rules it has to follow.
For NBFCs (Non-Banking Financial Companies) to work well, they must have good rules and people to make sure they follow these rules. 𝗧𝗵𝗶𝘀 𝗶𝘀 𝗮 𝗯𝗶𝘁 𝗹𝗶𝗸𝗲 𝗵𝗮𝘃𝗶𝗻𝗴 𝗿𝗲𝗳𝗲𝗿𝗲𝗲𝘀 𝗶𝗻 𝗮 𝘀𝗽𝗼𝗿𝘁𝘀 𝗴𝗮𝗺𝗲 𝘁𝗼 𝗺𝗮𝗸𝗲 𝘀𝘂𝗿𝗲 𝗲𝘃𝗲𝗿𝘆𝗼𝗻𝗲 𝗽𝗹𝗮𝘆𝘀 𝗳𝗮𝗶𝗿𝗹𝘆.
The RBI (Reserve Bank of India) wants to make sure these rules are followed very carefully. So, they suggest that NBFCs should have a special group of people responsible for making sure everyone follows the rules. They call this group the “𝗰𝗼𝗿𝗽𝗼𝗿𝗮𝘁𝗲 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗳𝘂𝗻𝗰𝘁𝗶𝗼𝗻.”
To make sure this group can do its job properly, it should be independent. This means it should not be controlled by the same people who are supposed to follow the rules. This independence helps make sure the rules are followed honestly.
In addition to this, the RBI also suggests that NBFCs should appoint a senior person called the”𝗖𝗵𝗶𝗲𝗳 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗢𝗳𝗳𝗶𝗰𝗲𝗿 (𝗖𝗖𝗢).” who will be in charge of making sure all the rules are followed properly. This CCO should be important within the company to make sure their voice is heard.
In a nutshell, the RBI wants NBFCs to have a strong and independent team to ensure everyone plays by the rules, and they want a senior person in charge of this team to make sure things are done right.
In our next blog will come back with more details of the rules; till then, stay connected.