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15 Compliance Gaps That Can Put NBFCs Under RBI Scrutiny

  • 03-Nov-2025
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15 Compliance Gaps That Can Put NBFCs Under RBI Scrutiny

In the last two years, the Reserve Bank of India (RBI) has imposed penalties on several Non-Banking Financial Companies (NBFCs) — not for fraud or major violations, but for avoidable compliance gaps.

These lapses often stem from routine operational oversights — outdated KYC records, incomplete AML checks, weak outsourcing controls, or delayed regulatory reporting. Even well-managed NBFCs can fall behind as regulations evolve and operations scale rapidly.

To stay ahead of RBI scrutiny, it’s crucial to identify and fix compliance gaps before they become violations.

⚠️ Common Compliance Gaps NBFCs Should Review

Here are some key areas where most NBFCs face compliance challenges:

  1. Outdated or incomplete KYC documentation
    – Inadequate periodic KYC updates and missing verification data.

  2. Weak Anti-Money Laundering (AML) controls
    – Inconsistent transaction monitoring and insufficient suspicious transaction reporting.

  3. Improper outsourcing arrangements
    – Lack of defined service level agreements, due diligence, and oversight for outsourced partners.

  4. Incomplete or unclear co-lending agreements
    – Missing clauses on risk-sharing, grievance handling, and data security in co-lending partnerships.

  5. Gaps in governance and board oversight
    – Infrequent board reviews, delayed compliance reporting, and weak risk assessment frameworks.

  6. Delayed regulatory filings and returns
    – Missing RBI deadlines for monthly, quarterly, or annual returns.

  7. Inadequate grievance redressal mechanism
    – Poor documentation and follow-up of customer complaints.

  8. Insufficient IT and cybersecurity policies
    – Failure to align with RBI’s digital lending and data protection norms.

  9. Incomplete fair practice code implementation
    – Lack of transparency in interest rate disclosure or borrower communication.

  10. Improper classification of loans and NPAs
    – Non-compliance with revised asset classification and provisioning norms.

  11. Delayed internal and statutory audits
    – Failure to conduct timely audits or act on key audit observations.

  12. Weak credit appraisal and underwriting standards
    – Missing documentation and inconsistent evaluation practices.

  13. Poor record retention and data management
    – Non-compliance with RBI’s record retention and digital storage requirements.

  14. Inadequate risk management framework
    – Missing policies for liquidity, market, or operational risk management.

  15. Lack of compliance culture
    – Compliance viewed as a reactive task rather than a proactive governance function.

🧩 Why Compliance Gaps Matter

Even a minor compliance lapse can trigger RBI audits, monetary penalties, and reputational damage. For NBFCs, especially those expanding into digital lending, co-lending, or fintech partnerships, regulatory vigilance is no longer optional — it’s essential for sustainability.

A structured compliance health check can help identify weaknesses early and ensure your operations stay aligned with the latest RBI guidelines.

✅ Get Expert Help with NBFC Compliance

At Induce India, we help NBFCs strengthen their compliance framework through:

  • Comprehensive compliance reviews and gap analysis

  • KYC/AML audits and RBI reporting support

  • Governance, documentation, and audit assistance

  • Advisory for co-lending and digital lending compliance

Stay compliant. Stay ahead of RBI scrutiny.

📞 Contact us for a free consultation:
+91 93113 47006

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