MANU/RMIC/0053/2019
Ministry : Reserve Bank of India
Department/Board : Department of Non Banking Regulation
Circular No. : DNBR(PD)CC.No.099/03.10.001/2018-2019
RBI/2018-2019/184
Date : 16.05.2019
Non-Banking Financial Company- Investment and
Credit Companies, Infrastructure Finance Companies,
Micro Finance Institutions, Factors and Infrastructure Debt Funds
Madam / Dear Sir,
Risk Management System - Appointment of Chief Risk Officer (CRO) for NBFCs
With the increasing role of NBFCs in direct credit intermediation, there is a need for NBFCs to augment risk management practices. 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 clearly specified role and responsibilities. The CRO is required to function independently so as to ensure highest standards of risk management.
2. The NBFCs shall strictly adhere to the following instructions in this regard:
a) 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.
b) The CRO shall be appointed for a fixed tenure with the approval of the Board. The CRO can be transferred/removed from his post before completion of the tenure only with the approval of the Board and such premature transfer/removal shall be reported to the Department of Non-Banking Supervision of the regional office of the Bank under whose jurisdiction the NBFC is registered. In case the NBFC is listed, any change in incumbency of the CRO shall also be reported to the stock exchanges.
c) The Board shall put in place policies to safeguard the independence of the CRO. In this regard, the CRO shall have direct reporting lines to the MD & CEO/Risk Management Committee (RMC) of the Board. In case the CRO reports to the MD & CEO, the RMC/Board shall meet the CRO without the presence of the MD & CEO, at least on a quarterly basis. 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.