RBI Governor Warns NBFCs: Rethink Loan Incentive Practices

RBI Governor Shaktikanta Das warns Non-Banking Financial Companies against employee loan incentives that can harm customer interests. During the monetary policy announcement, he emphasized the need for NBFCs to promote sustainable business practices and fair customer service, cautioning against high-pressure work environments and excessive growth targets.

The Reserve Bank of India (RBI) Governor, Shaktikanta Das, has issued a warning to Non-Banking Financial Companies (NBFCs) concerning employee incentive schemes tied to loan approvals. Speaking during the announcement of the monetary policy, Das stressed that such practices could adversely affect customer interests and lead to an unhealthy work culture.

Governor Das highlighted the RBI's vigilant monitoring of these areas, indicating a readiness to take necessary actions if NBFCs do not self-correct. Some NBFCs, he noted, have adopted compensation models emphasizing variable pay and incentives driven by targets. This, he warned, may foster a high-pressure work atmosphere, detrimental to customer service quality.

Das urged NBFCs, including microfinance institutions (MFIs) and housing finance companies, to focus on sustainable business aspirations while nurturing a compliance-first culture. He recommended robust risk management and adherence to ethical customer engagement practices. Despite positive health indicators for NBFCs, Das expressed concern over a few firms pursuing aggressive growth, led by substantial domestic and overseas capital inflows, potentially at the expense of customers.

(With inputs from agencies.)