The Reserve Bank of India told non-banking finance companies with assets size of over Rs 5000 crore to appoint a chief risk officer to improve standards of their risk management.
"With the increasing role of NBFCs in direct credit intermediation, there is a need for NBFCs to augment risk management practices," the central bank said Thursday.
RBI's directive comes at a time when India's shadow banks are is facing a funding crisis as some of the firms are burdened with over-leveraging and mismatch between assets and liabilities.
"Boards of NBFCs should strive to follow best practices in risk management. The CRO is required to function independently so as to ensure highest standards of risk management," RBI said.
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 CRO shall not have any reporting relationship with the business verticals of the NBFC and shall not be given any business targets. Further, there shall not be any ‘dual hatting’ i.e. the CRO shall not be given any other responsibility," RBI said.
SOURCE- ECONOMIC TIMES