Select Your Location
Directions have been issued by the RBI on managing risks and code of conduct related to the outsourcing norms for NBFC.
Non-banking financial companies (NBFCs) are those types of financial institutions that provide banking services but which are different from the banks. i.e. NBFCs do not hold a banking license.
It is the responsibility of the Reserve Bank of India to regulate and supervise the Non-Banking Financial Companies by virtue of powers vested under Reserve Bank of India Act, 1934.
NBFCs are restricted from taking public deposits however it depends upon the jurisdiction. Irrespective of the fact operations of these types of institutions are often still covered under the country’s banking regulations.
There is a restriction on the NBFCs to accept demand deposits.
NBFCs cannot issue cheques drawn on it and they also do not form part of the payment and settlement system.
Like in the case of banks, the deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to the depositors of NBFCs.
Core management functions such as internal audit, strategic and compliance functions for know your customer (KYC) norms; the sanction of loans and management of investment portfolio cannot be outsourced in Non-banking financial companies (NBFCs).
According to RBI Outsourcing Guidelines for NBFCs have to ensure that service providers are able to identify the customer information, documents, records, and assets to protect the confidentiality of the information. In case of leakage of confidential information related to the customer should be reported to the central bank immediately. RBI clarified that in case of damages to customer NBFCs would be liable.
Also, Read: Procedure Required for Getting Registration as NBFC-IDF.
For direct sales and recovery agents, a board approved a code of conduct should also be put in place.
There will be no harassment of any kind, either verbal or physical, against any person for debt collection, for example, humiliate publicly or intrude the privacy of the debtors’ family members, friends, making threatening and anonymous calls or making false and misleading representations.
Grievance redressed machinery will be constituted by NBFCs and name and contact details of the redressed officer will be displayed prominently at their branches. It should be noted that NBFCs’ grievance redressed machinery will deal with the issues related to the services provided by the outsourced agency.
It will be a responsibility of the NBFC for making currency transaction reports and suspicious transaction reports to the Financial Intelligence Unit in relation to the activities carried out by the service providers.
In order to perform the NBFC outsourcing guidelines function, access to customer information by the service provider shall only be on ‘need to know’ basis means limited to those areas where the information is required.
Read More: RBI Ease Norms for Banks to Increase Credit Flow to NBFCs.
Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.
The objective of the enactment of the Prevention of Money-laundering Act, 2002, i.e. PMLA (the...
Tax planning is a continuing effort and a management strategy for ensuring the minimization of...
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper o...
Infrastructure and real estate have been regarded as India's "sunshine sector" since the turn o...
On 22nd May 2023, the Central Board of Direct Taxes (CBDT) issued a new circular under secti...
Anyone can have different sources of income. With globalization and the opening up of economies...
The Reserve Bank of India (RBI) is crucial in regulating NBFC, including branch openings and cl...
In India, Non-Banking Financial Companies are subject to certain restrictions from taking publi...
It's usually a good idea to diversify the assets in your financial portfolio, especially during...
A nation is being built by the non-banking finance company through the development of wealth, t...
Are you human?: 4 + 3 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
NBFC DSA denotes Non-Banking Financial Companies Direct Selling Agent. NBFC DSA Registration refers to the registra...
06 Sep, 2021
Recently, the Reserve Bank of India (RBI) came up with a Prompt Corrective Action (PCA) Framework for NBFCs with a...
20 Dec, 2021
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!