What changed
RBI issued a master circular consolidating all existing corporate governance instructions for NBFCs as of June 30, 2012. It reiterated requirements for Audit Committees (assets ≥₹50 crore), advised that NBFC-D with deposits ≥₹20 crore and NBFC-ND-SI may form Nomination Committees, and advised Risk Management Committees for NBFCs with public deposits ≥₹20 crore or assets ≥₹100 crore. The circular also mandated regular board-level disclosures on risk management and governance compliance.
What it means for you
NBFCs must ensure their board committees are constituted as per the thresholds—Audit Committee for asset size ≥₹50 crore, and may consider forming Nomination Committee for NBFC-D with deposits ≥₹20 crore and NBFC-ND-SI, and Risk Management Committee for public deposits ≥₹20 crore or assets ≥₹100 crore. This strengthens governance, transparency, and risk oversight, aligning NBFCs with best practices. Lenders should review their committee structures and disclosure processes to comply with these consolidated guidelines.
What you must do
- Verify if your NBFC meets the thresholds for Audit Committee (assets ≥₹50 crore), and consider forming Nomination Committee (deposits ≥₹20 crore or NBFC-ND-SI) and Risk Management Committee (public deposits ≥₹20 crore or assets ≥₹100 crore) if not already in place.
- Ensure the Audit Committee has at least three board members and the Nomination Committee verifies 'fit and proper' status of directors.
- Implement regular board-level disclosures on risk management systems, policies, and governance compliance as prescribed by the board.
- Review and update your corporate governance framework to align with the consolidated master circular, referencing the RBI website for the full text.
Who it affects
All deposit-taking NBFCs (NBFC-D) with deposit size of ₹20 crore and above (for guidelines, including Nomination Committee consideration), All non-deposit taking NBFCs with asset size of ₹100 crore and above (NBFC-ND-SI) (for guidelines, including Nomination Committee consideration), NBFCs with assets of ₹50 crore and above (for Audit Committee requirement), NBFCs with public deposits of ₹20 crore and above or asset size of ₹100 crore and above (for Risk Management Committee consideration)
Which NBFCs are required to form an Audit Committee under this circular?
NBFCs with assets of ₹50 crore and above as per the last audited balance sheet must constitute an Audit Committee with at least three board members. NBFC-D with deposit size of ₹20 crore may also consider forming one.
What is the purpose of the Nomination Committee recommended by RBI?
The Nomination Committee ensures that proposed or existing directors meet 'fit and proper' criteria, as required under Section 45-IA(4)(c) of the RBI Act, 1934, to protect depositor interests. It may be formed by NBFC-D with deposits ≥₹20 crore and NBFC-ND-SI.
What disclosures must NBFCs make to their board regularly?
NBFCs must report progress on risk management systems, risk management policy and strategy, and conformity with corporate governance standards, including composition and role of various committees, at intervals prescribed by the board.