Financial inclusion is not a licence to exploit: RBI dy guv
Business Standard [
Mumbai
]
Chennai
,
Pune
Apr 11, 2025 | Page No.: 1 | Position: Top Left | Source: Anupreksha Jain | Sq Cm: 291 | AVE: 145383 | PR Value: 726915
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FINANCIAL INCLUSION IS NOT A LICENCE TO EXPLOIT RBI DY GUV Reserve Bank of India RBI Deputy Governor Swaminathan 1 came down heavily on some shadow banks Unfortunately some NBFCs think they can pursue a business model where it is par for the course to resortto weak underwriting in pursuit of quick growth he said 6? Financial inclusion is not a licence to exploit RBI dy guy NBFCs pulled up for lax underwriting steep charges ANUPREKSHA JAIN Mumbai 10 April Reserve Bank of India RBI Deputy Governor Swaminathan J criticised some non-banking financial companies NBFCs for lax loan appraisal practices and charging excessive interest rates even as he acknowledged the sector s rapid expan- sion over the past decade especially in recent years Unfortunately some NBFCs seem to believe they can operate with weak underwriting in the pursuit of fast growth while levying excessive and unsustainable interest rates some- times disguised as upfront or processing fees followed by aggressive recovery methods in case of default Swaminathan said at the conference of NBFCs in Chennai last month The 66 UNFORTUNATELY SOME NBFCs speech was published on the RBI web- THINKTHEYCAN PURSUEA site on Thursday Calling such practices unacceptable BUSINESS MODEL WHERE IT IS PAR Swaminathan said Financial inclusion FORTH E COURSETO RESORTTO WEAK cannot be used as a pretext for financial UNDERWRITING IN PURSUITOF exploitation He stressed that fair conduct is a QUICK GROWTH shared responsibility of the chief exec- utive the board and internal assurance SWAMINATHAN J Deputy Governor RBI functions A customer-centric culture must be driven from the top and embedded throughout the organisa- tion he said ing and its exposure to higher-risk bor- Highlighting the importance of fair rowers making it more susceptible to treatment he added Even as we pur- market volatility and liquidity shocks sue scale speed and profit we must not He urged statutory auditors to close- lose sight of fairness to a customer it ly examine the strength of internal con- is the foundation of a sustainable busi- trols in NBFCs ness model Audit findings must lead to timely He urged NBFCs to fulfil their prom- meaningful corrective action not just ise of inclusion by treating customers sit in meeting minutes he said calling with dignity clarity and care This for greater scrutiny of complex struc- means offering transparent easy-to- tures derivatives off-balance-sheet understand pricing free from hidden items related-party transactions and costs or predatory interest rates In cas- provisioning policies es of default recovery should be han- NBFCs he said have become vital dled with empathy and respect he engines of credit extending loans to said segments long underserved or excluded Swaminathan also called for intelli- by the traditional banking system gent risk management NBFCs he said Harnessing technology and local must build strong internal controls to insight they ve crafted tailored prod- assess and manage asset-liability mis- ucts for diverse borrowers matches and monitor the composition Their agility and close customer ties and tenor of their funding sources He Swaminathan added have allowed pointed out that the sector s structural NBFCs to complement banks and in vulnerabilities stem from its reliance on many cases drive the growth of a deep- short-term funding for long-term lend- er more inclusive financial ecosystem