The Reserve Bank of India (RBI) has sought feedback from non-banking finance companies (NBFCs) on draft guidelines proposed for regulating revolving credit facilities, while stressing the need for stronger compliance, internal audit and risk management frameworks.
According to a report by NDTV Profit, citing sources, the central bank raised these issues during a recent interaction with senior NBFC executives. The RBI emphasised the importance of maintaining robust internal controls and closely monitoring lending products that are witnessing rapid growth.
The regulator is also looking to align the regulatory framework for NBFCs more closely with global standards, the report said. NBFCs were advised to identify and address risks arising from new products and business models at an early stage to prevent vulnerabilities from building up across the sector.
The RBI acknowledged that NBFCs are often early adopters of technology-driven lending products and business models. It indicated that their experience with emerging technologies and new lending models could provide useful insights for shaping future regulations.
The role of self-regulatory organisations (SROs) was also discussed during the interaction. The RBI clarified that SROs should not function as parallel regulators but should act as the industry’s first line of defence by promoting compliance and helping NBFCs identify and address emerging risks.
The central bank also called on NBFCs to strengthen consumer grievance redressal mechanisms and ensure that customer complaints are resolved effectively within prescribed timelines.
At the same time, NBFCs were advised to ensure full compliance with the RBI’s digital lending framework and the Digital Personal Data Protection Act. The emphasis comes as lenders increasingly rely on technology and digital channels for customer acquisition, underwriting and servicing.
The latest interaction is part of the RBI’s ongoing supervisory engagement with NBFCs. RBI officials met senior executives of NBFCs last week amid the regulator’s heightened focus on risks associated with rapidly expanding lending products and technology-led business models.
The RBI’s emphasis on stronger internal controls, early risk identification and consumer protection comes as the NBFC sector continues to adopt new technologies and expand digital lending, making effective risk management and regulatory compliance increasingly important.