RBI Cautions NBFCs, MFIs and HFCs on Aggressive Expansion
Why in the news
The RBI warned NBFCs, MFIs and HFCs that rapid expansion without sound risk frameworks and sustainable practices can harm both customers and financial stability.
Key facts
- Concern: pursuit of high return on equity, causing steep interest rates, heavy processing fees and penalties.
- Advice: build a compliance-first culture and follow Fair Practices Codes strictly.
- Resolve customer grievances effectively.
- Review compensation and incentive structures so they do not encourage poor service or unethical conduct.
Significance
- Promotes prudent lending and risk management.
- Safeguards financial stability and consumer interests.
- Supports responsible growth of the NBFC sector.
Exam angle
- Entities addressed: NBFCs, MFIs and HFCs.
- Key code mentioned: Fair Practices Code.
- Regulator: RBI.