India’s central bank said on May 16 that shadow banks with asset size of more than 50 billion rupees should appoint a chief risk officer in a move to tighten regulation after a series of defaults at top lender Infrastructure Leasing & Financial Services’ (IL&FS).
The government took control of IL&FS last year after its default triggered fears about contagion in India’s financial sector.
An independently functioning chief risk officer with clearly specified role and responsibilities has to be appointed by non banking financial companies (NBFCs), the Reserve Bank of India said in a statement.
“With the increasing role of NBFCs in direct credit intermediation, there is a need for NBFCs to augment risk management practices,” the central bank said in a statement.
The central bank said that the chief risk officer has to be appointed for a fixed tenure and cannot be removed without board approval.