The Reserve Bank of India urged Non-Banking financial companies (NBFCs) with Rs 5,000 crore to designate board-approved chief risk officer (CRO) with enough professional capacity.
The RBI in a notification said this is being made to increase risk management systems in view of the growing role of non-banking financial companies (NBFCs) in direct credit intermediation.
“While boards of NBFCs should strive to follow best practices in risk management, it has been decided that NBFCs with asset size of more than Rs.50 billion shall appoint a CRO with the clearly specified role and responsibilities,” it said.
The CRO shall be a senior official in the ministry of an NBFC and shall maintain sufficient professional skill/ experience in the area of risk management, as per the RBI.
“The CRO shall be appointed for a fixed tenure with the approval of the board,” it said.
The officer can be transferred/ removed from his appointment before completion of the tenure with the permission of the board, it added.
If the NBFC is filed, any variation in the incumbency of the CRO should be notified to the stock exchanges.
The board should set the policies to safeguard the independence of the CRO.
“The CRO shall not have any reporting relationship with the business verticals of the NBFC and shall not be given any business targets.
Further, there shall not be any ‘dual hatting’ i.e. the CRO shall not be given any other responsibility,” the RBI added.
The CRO’s role in determining credit programs shall be limited to being an advisor.Share this to your,