- The Reserve Bank of India has directed non-banking finance companies (NBFC) with assets size of over Rs 5000 crore to appoint a chief risk officer(CRO) to improve standards of their risk management.
- This directive comes at a time when NBFCs are facing a funding crisis as some of the firms are burdened with over-leveraging and mismatch between assets and liabilities.
- RBI also told NBFCs to ensure the independence of their CRO.The CRO shall be a senior official in the hierarchy of an NBFC and shall have professional qualification/experience in the area of risk management.
- The primary role of the risk officer will be identification, measurement and mitigation of risks.Further,all credit products (retail or wholesale) shall be vetted by the CRO from the angle of inherent and control risks.
- An NBFC is a company registered under the Companies Act, 1956.It engages in the business of (a)loans and advances (b)acquisition of shares /stocks/ bonds/ debentures/securities issued by Government or local authority or other marketable securities of a like nature leasing and (c)hire-purchase,insurance business,chit business.
- However,it does not include any institution whose principal business is that of (a)agriculture activity (b)industrial activity (c)purchase or sale of any goods (other than securities) and (d)providing any services and sale/purchase/construction of immovable property.
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