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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SP has ended contract with I-PAC due to fund constraints: Akhilesh Yadav
Lucknow (PTI): Samajwadi Party president Akhilesh Yadav on Wednesday said his party has severed its association with the Indian Political Action Committee (I-PAC) due to a lack of funds.
He dismissed speculations that the termination of contract was because of recent election results.
Addressing a press conference here, Yadav said the party had engaged I-PAC for a brief period ahead of the 2027 Uttar Pradesh Assembly elections but could not continue the arrangement.
"Yes, we had an association. They worked with us for a few months, but we are not able to continue because we do not have that kind of funding," he said.
The I-PAC is a political consultancy firm known for managing major election campaigns across the country.
Election strategist-turned-politician Prashant Kishor has also been associated with the organisation in the past and has worked with multiple parties, including the BJP and the Congress.
In a lighter vein, Yadav took a swipe at the ecosystem of political consultancies. "We thought that if we have to work with a 'winning agency', then there are several big companies."
He said that some people suggested conducting surveys, hiring another firm, keeping a social media company, and even engaging agencies for negative campaigning against other parties.
"There are one or two more companies whose names are not yet known. I can get those for you as well," Yadav said.
Yadav rejected the suggestion that the decision to end the deal was influenced by recent election outcomes in states such as West Bengal.
"There is no such thing. Do not ask questions based on baseless reports. That is not true," he said.
"This is not the reason for ending the agreement. We simply do not have enough funds. If you (the media) give us funds, we can hire another company," the former Uttar Pradesh chief minister said.
