Policies required to be made by NBFC - Overview
RBI has mandated NBFC to formulate various policies like KYC Policy, IT Policy, Fair practice
code, etc. and be governed by those policies while operating its business operations.
The NBFC once formulate the policy must follow the same in its normal business practices.
These policies are mandated by RBI on NBFC, to reduce the chances of fraud and bring more
transparency in all the transactions done by NBFC.
Policies required to be made by NBFC
Information Technology (IT) Policy
As the scope of the IT framework has been increasing day by day in the NBFC sector, RBI has
mandated to formulate an IT Policy for every NBFC, which must be approved by the Board of
the NBFC.
The Reserve bank of India has categorized the directions for formulation of IT Policy in two
parts for Systematically important NBFC and Non Systematically important NBFC. That
framework must be kept in mind while formulating the IT Policy by the concerned NBFC.
Know Your Customer (KYC) Policies and Anti Money Laundering (AML) Measures
RBI has mandated every NBFC to formulate the KYC Policy framework and Anti Money Laundering
Measures and get it approved by the Board of the NBFC.
KYC policy includes elements like Customer acceptance Policy, Customer identification
procedures, etc.
The NBFC must comply with the KYC Policy and AML Measures and must ensure that the KYC
information obtained from the customer must be kept confidential and also all the processes
followed by the NBFC must ensure that no transaction will lead to any kind of money
laundering.
Fair Practice Code (FPC) of NBFC
Every NBFC must formulate the fair practice code of the company which must be approved by the
Board of the company.
The fair practice code includes the general principles on adequate disclosures on the terms
and conditions of a loan and also adopting a non-coercive recovery method.
The Fair practice code of the company must be reviewed every year by the board of the company
and the company must ensure to follow the operation in consonance with the fair practice
code of the NBFC.
