The Reserve Bank of India on Tuesday issued a mandate stating the requirement of independent compliance function and the appointment of a Chief Compliance Officer (CCO) in Non-Banking Financial Companies (NBFCs).
"Compliance function serves a critical role as part of overall corporate governance. Hence, the RBI has decided to introduce certain principles, standards and procedures for compliance function in NBFC-Upper Layer (NBFC-UL) and NBFC-Middle Layer (NBFC-ML)," the central bank said,
NBFCs in the NBFC-Base layer (NBFC-BL) will continue to be governed under existing guidelines, the RBI stated.
The central bank has mandated that the NBFC-UL and NBFC-ML be put in place a board-approved policy latest by April 1, 2023, and a compliance function (including the appointment of CCO) by October 1, 2023.
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The RBI said its circular should be placed in the immediate next meeting of the Board of Directors for information and devising an implementation strategy, under the Board’s supervision in a time-bound manner.
"The CCO shall be the nodal point of contact between the NBFC & the regulators and the CCO's tenure should be a minimum fixed tenure of not less than 3 years. The CCO would also head the Compliance department," the RBI stated.
On Monday, the RBI said 22 NBFCs, including BNP Paribas India Finance, Swiss Leasing and Finance, and Available Finance, have surrendered their registration certificate. The central bank cancelled their Certificate of Registration (CoR) as they have surrendered the same.
With cancellation of the CoRs, these 22 entities cannot transact the business of a Non-Banking Financial Company (NBFC), the RBI said in a statement.
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