92% NBFCs Missed At Least One Critical Compliance In 12 Months: Survey

TeamLease Regtech’s report while citing challenges for compliance management for Indian Non Banking Financial Companies (NBFCs) stated that 92 per cent of the surveyed NBFCs agreed that they had missed at least one critical compliance in 12 months.

As per the report, there are more than 200 industry-specific compliance requirements for an NBFC operating at a single location within the country.  

“These include maintenance of records, returns, and filings under the Prevention of Money Laundering Act, 2002, Prevention of Money Laundering (Maintenance of Records) Rules, 2005, and RBI Guidelines on Fair Practices Code for NBFCs, among others,” it added. 

The report revealed that a company operating in a single state must comply with at least 621 compliances that involve more than 35 one-time registrations and approvals. As an institution grows its geographical footprint, the number of applicable compliances also rises in conjunction.  

In 2022 alone, RBI alone issued more than 27 regulatory updates specific to the NBFC sector. This significant number of regulatory updates creates a compliance universe that is highly fluid, it added. 

Rishi Agrawal, CEO, Co-founder, TeamLease Regtech said, “The NBFC sector is one of the key drivers of growth in the Indian economy. It serves a section of society that is not usually catered to by commercial banks. The report delves into the regulatory ecosystem of NBFCs to give readers an insight into the complexity of the compliance landscape.  

Agrawal added that it points out the challenges and inefficiencies in the present compliance processes adopted by these financial institutions. It also proposes recommendations that will allow these companies effectively manage their compliance obligations with the help of digital processes.”