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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Karnataka keen to promote its handcraft & handloom products to tourists visiting Maldives: CM
Bengaluru (PTI): Karnataka Chief Minister Siddaramaiah on Wednesday offered to facilitate the growth of the information technology industry in Maldives, and expressed keenness to promote the state's handicraft and handloom products to tourists visiting the island nation.
Addressing a delegation led by Maldivian President Mohamed Muizzu, who was accompanied by his wife Sajidha Mohamed, at Raj Bhavan here, he said Karnataka, known as the Silicon Valley of India, has developed an ecosystem for start-ups, Artificial Intelligence, global capacity building centres and innovation.
"I am given to understand that the government of Maldives is interested in having partnerships with the leading IT industry of Bengaluru," he said. "We will be very happy to facilitate the growth of the IT industry in Maldives," he said.
Siddaramaiah said he was pleased to note that Sajidha Mohamed was a student in Bengaluru.
He said the State would be happy to have trade ties with
Maldives to promote the marketing of its handicrafts and handlooms to reach out to a large number of tourists visiting the island nation.
Karnataka, the Chief Minister said, is known for its diversity of nature, culture and rich heritage.
Siddaramaiah noted that the state's tourism tagline is:
“One State, Many Worlds”.
"Apart from almost 300 km of coastline, we have the world's second largest 'Shola Forest' hosting Tiger and Bird Sanctuaries. We look forward to a partnership with Maldives to promote educational and cultural exchange," he added.
