RBI governor warns NBFCs against pursuing unsustainable practices to push growth
Mumbai (PTI): RBI Governor Shaktikanta Das on Wednesday warned of action against those non-banking financial companies (NBFCs) who are pursuing unsustainable practices to push growth.
In a strongly-worded statement while announcing the bi-monthly policy review, Das asked such NBFCs to be sincere, fair and follow sustainable practices.
"It is important that NBFCs, including MFIs (microfinance institutions) and HFCs (housing finance companies), follow sustainable business goals; a 'compliance first' culture; a strong risk management framework; a strict adherence to fair practices code; and a sincere approach to customer grievances," Das said.
"The Reserve Bank is closely monitoring these areas and will not hesitate to take appropriate action, if necessary," he warned adding that the RBI wants NBFCs to undertake "self-correction".
The NBFC segment has registered an "impressive growth" over the last few years, Das said, acknowledging that such lenders have helped the policy objective of financial inclusion.
However, some NBFCs are pursuing growth aggressively without building up sustainable business practices and risk management frameworks, he rued.
"An imprudent 'growth at any cost' approach would be counter productive for their own health," the Governor said.
Having raised capital from domestic and foreign sources, some entities are chasing excessive returns on their equity, he said, pointing out that concern arises when the interest rates become usurious and get combined with unreasonably high processing fees and frivolous penalties.
Moreover, there is a "push effect", wherein "business targets drive retail credit growth rather than its actual demand", Das said, fearing that this may also pose a financial stability risk because of high cost and high indebtedness.
He also asked the entities to review their staff compensation practices, variable pays and incentive structures, noting that some of it appears to be purely target-driven and may result in adverse work culture and poor customer service.
Das also made it clear that the health parameters of banks and NBFCs continue to be "strong" even as there has been some commentary of stress build-up in unsecured segments.
He asked banks and NBFCs to carefully assess their individual exposures in these areas, both in terms of size and quality, and have robust underwriting and monitoring of loans.
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Sujit Nair raises concerns over speculation of DMK-AIADMK understanding to block TVK
Chennai: Journalist and political commentator Sujit Nair has expressed concern over speculation that the Dravida Munnetra Kazhagam and the All India Anna Dravida Munnetra Kazhagam could explore a post-poll understanding to prevent Vijay-led Tamilaga Vettri Kazhagam from forming the government in Tamil Nadu.
In a social media post, Sujit Nair said the election verdict in Tamil Nadu reflected a clear public demand for political change and argued that the mandate should be respected irrespective of political preferences.
Referring to reports and political discussions surrounding a possible understanding between the DMK and AIADMK, he said he hoped such developments remained only speculative conversations and did not turn into reality.
Nair stated that if such an alliance were to take shape, it would raise serious questions about ideological politics in the country. He said TVK had emerged through a democratic electoral process and that the legitimacy to govern in a parliamentary democracy comes from the people’s verdict.
According to him, attempts to prevent an electoral winner from forming the government through unexpected political arrangements may be constitutionally valid, but many people could view them as politically opportunistic.
He further said that such a move could particularly affect the political image of the DMK, which has historically projected itself around ideology, social justice and opposition politics. Nair said that in ideological terms, the DMK appeared closer to TVK than to the AIADMK, and joining hands with its long-time political rival only to remain in power could weaken its broader political narrative.
He added that the same questions would apply to the AIADMK as well, as the party had spent decades positioning itself against the DMK and such an arrangement could create discomfort among its cadre and supporters.
Drawing a comparison with Maharashtra politics in 2019, Nair said he had expressed similar views when the Shiv Sena formed an alliance with the Indian National Congress and the Nationalist Congress Party after the Assembly elections.
He said post-poll alliances between long-standing political rivals often create a public perception that ideology and electoral mandates become secondary when political power equations come into play.
Nair also said such developments increase public cynicism towards politics and reinforce the belief among voters that ideology is often sidelined after elections.
He maintained that the Tamil Nadu verdict was emphatic and said respecting both the spirit and substance of the mandate was important for the credibility of democratic politics.
