RBI: Make large NBFC CROs' tenure fixed

Mumbai: The Reserve Bank of India (RBI) on Thursday asked NBFCs with asset size of over Rs 5,000 crore to appoint board-approved chief risk officer (CRO) with adequate professional qualification and a fixed tenure. This is being done to augment risk management practices in view of the increasing role of non-banking financial companies (NBFCs) in direct credit intermediation, the RBI said in a notification.

"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 chief risk officer with clearly specified role and responsibilities," it said.

As per the RBI, the CRO shall be a senior official in the hierarchy of an NBFC and shall possess adequate professional qualification/ experience in the area of risk management.

"The CRO shall be appointed for a fixed tenure with the approval of the board," it said and added that the officer can be transferred/ removed from his post before completion of the tenure only with the approval of the board.

In case the NBFC is listed, any change in incumbency of the CRO should also be reported to the stock exchanges. Further, the board should put in place policies to safeguard the independence of the CRO.

In this regard, RBI said the CRO should have direct reporting lines to the MD and CEO/ Risk Management Committee (RMC) of the board.