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A nation is being built by the non-banking finance company through the development of wealth, the creation of jobs, the arrangement of working capital, and other factors. NBFC supports financial management for the general public at a reasonable credit rate. With the exception of institutions whose primary business is agriculture, industry, the purchase or sale of any goods (other than securities), the provision of any services, or the sale or purchase of any securities, NBFC is primarily engaged in the business of advances and loan, acquisition of stocks, bonds, shares, debentures, securities issued by the government or local authority, or other marketable securities of a like leasing, nature, hire-purchase, insurance business, and chit business. The directors and shareholders who are in charge of directing the activities of the companies must be fit and proper in addition to possessing the necessary qualifications due to the rising integration of Non-Banking Financial Companies in the financial sector and their growing systemic significance. Due to this, the following additional regulations are being implemented, and they came into effect on March 31, 2015, for all NBFCs-ND-SI and NBFCs-D.
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No financial institution needs to emphasise the significance of directors exercising due diligence to determine their eligibility for the position in terms of qualifications, technical experience, track record, honesty, etc. It is suggested that the same rules apply to NBFCs as well. Although the Reserve Bank conducts due diligence on directors prior to issuing a Certificate of Registration to an NBFC, NBFCs must continuously implement an internal supervision procedure.
Additionally, NBFCs are recommended to make sure that the procedures listed below are followed and the individuals meet minimal criteria before they are appointed to the Boards in order to expedite and bring uniformity to the process of due diligence when appointing directors:
This policy’s objectives are to:
The Company will submit a statement to the RBI on a quarterly basis outlining any changes to the Company’s Board of Directors. The statement of change for the year’s final quarter, ending March 31, will be certified by the Company’s auditors and will also be accompanied by a certificate from the Managing Director of the Company attesting to the application of fit and proper criteria in the selection of such new directors.
Within 15 days of the end of the quarter, the statement must reach the Reserve Bank’s concerned Regional Office.
Overall, NBFCs must meet criteria in order to protect investors’ interests, provide financial stability, promote compliance with legislation, improve governance and risk management procedures, and uphold the industry’s reputation. Regulatory authorities want to build a more stable and reliable financial system. Thus, they have high standards for anybody working for an NBFC.
Read our Article: Returns by NBFC Having Overseas Investment
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