Non-banking financial companies (NBFCs) should bolster governance and assurance functions and maintain constant vigil against potential risks and vulnerabilities, according to RBI Deputy Governor Swaminathan J.

In the highly dynamic and challenging environment in which financial entities operate, NBFCs are exposed to a multitude of risks that can impact their financial and operational resilience, he said at a conference for the heads of assurance functions of select NBFCs in Mumbai on Wednesday.

Swaminathan highlighted cybersecurity and operational risks, credit risks from rule-based credit models, and liquidity risks.

He conveyed the Reserve Bank’s supervisory expectations from the NBFCs to ensure independent and meaningful assurance functions as well as fair and transparent conduct towards customers.

Deputy Governor M Rajeshwar Rao, in his keynote address, outlined the transformative journey and progress witnessed in the Indian financial landscape and the contribution of the NBFC sector in last-mile credit delivery.

He delineated the role of assurance functions (that is, Chief Compliance Officers, Chief Risk Officers, and Heads of Internal Audit) in certain contextual issues such as third-party dependencies and operational risks; customer conduct; and transparency in operations.

The conference was attended by about 280 participants, representing more than 100 NBFCs.

This event, with the theme ‘Resilient Financial System: Role of Effective Assurance Functions’, is a part of the series of supervisory engagements the Reserve Bank has been organising over the last one year with its regulated entities, per a RBI statement.

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