{"id":31013,"date":"2021-05-24T14:04:10","date_gmt":"2021-05-24T08:34:10","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=31013"},"modified":"2024-12-09T17:30:33","modified_gmt":"2024-12-09T12:00:33","slug":"corporate-governance-in-nbfc","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/corporate-governance-in-nbfc\/","title":{"rendered":"Corporate Governance in NBFC- A Detail Overview"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Corporate Governance refers to a set of system, principles &amp; process by which an organization is governed. It underpins guidelines as to how an organization can be directed to meet its goals such that it adds value and is beneficial for shareholder as well. Since corporate Governance also set up a framework for attaining an organization&#8217;s objectives, it covers practically every facet of management, from internal controls &amp; action plans to performance measurement &amp; corporate disclosure. A transparent &amp; agile corporate governance empowers a company to make informed and ethical decisions that oust anything which is against the stakeholder&#8217;s interest. A company with bad Corporate Governance is more likely to engage in scandals and bankruptcy.  In this article, we shall briefly explain Corporate Governance in NBFC. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/corporate-governance-in-nbfc\/#What_is_the_Significance_of_Corporate_Governance\" >What is the\nSignificance of Corporate Governance?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/corporate-governance-in-nbfc\/#Recent_steps_by_Private_Lender_for_Corporate_Governance_in_NBFCs\" >Recent\nsteps by Private Lender for Corporate Governance in NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/corporate-governance-in-nbfc\/#Pressing_Ethical_Issues_in_Corporate_Governance\" >Pressing Ethical\nIssues in Corporate Governance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/corporate-governance-in-nbfc\/#Possible_remedies_to_ethical_issues_hampering_Corporate_Governance\" >Possible\nremedies to ethical issues hampering Corporate Governance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/corporate-governance-in-nbfc\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Significance_of_Corporate_Governance\"><\/span>What is the\nSignificance of Corporate Governance?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The following factors can help you understand the importance of corporate Governance&nbsp;<\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Compliance &amp; Risk Alleviation<\/h3>\n\n\n\n<p>Compliance, risk alleviation &amp; Governance\nare somehow interrelated. A company excels on principles that ensure legal and\nseamless inculcation of compliances. If a company carries out its operation in\na bonafide way, it can handle any risk whatsoever.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Indispensable for Mergers &amp; acquisitions<\/h3>\n\n\n\n<p>Corporate Governance is imperative, particularly in the event of <strong><a href=\"https:\/\/corpbiz.io\/mergers-and-acquisitions\">mergers and acquisitions<\/a><\/strong>. It allows an organization to draw a line of distinction between the legit and bad deals. Mergers and acquisitions can help improve the Corporate Governance&#8217;s quality.\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Fortify shareholder value<\/h3>\n\n\n\n<p>Corporate Governance strengthens and secures the\nshareholder&#8217;s interest. It plays a vital role in protecting the firm&#8217;s\nvaluation as the primary aim of corporate Governance is to render complete\nprotection to its shareholders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Improves organizational efficiency<\/h3>\n\n\n\n<p>Corporate Governance is a key performance indicator of industrial competitiveness. Better Corporate Governance in <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFCs<\/strong><\/a> ensures improved corporate performance and also imparts better economic outcomes.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/underlining-importance-of-budget-2021-for-nbfcs-and-bank\/\">Underlining Importance of Budget 2021 for NBFCs and Banks<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Recent_steps_by_Private_Lender_for_Corporate_Governance_in_NBFCs\"><\/span>Recent\nsteps by Private Lender for Corporate Governance in NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>Most of the recent steps taken by private lenders for better corporate Governance in NBFC are as follows:-<\/strong><\/em><\/p>\n\n\n\n<ul>\n<li>Constitution\nof committees such as investor&#8217;s grievances Committee, Management Committee,\nALM (Asset Liability Management) committee etc.<\/li>\n\n\n\n<li>Gradual\ninculcation of prudential norms as per the Reserve Bank of India.&nbsp;<\/li>\n\n\n\n<li>Introduction\nof the charter of a citizen in NBFCs.&nbsp;<\/li>\n\n\n\n<li>Inculcation\nof the KYC&#8217;s concept.&nbsp;<\/li>\n\n\n\n<li>Accountability\nof top management &amp; Board of Directors for good Corporate Governance.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pressing_Ethical_Issues_in_Corporate_Governance\"><\/span>Pressing Ethical\nIssues in Corporate Governance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Corporate fraud refers to an illicit practice\nthat occurs within a company by its owners or manager and involves:<\/p>\n\n\n\n<ul>\n<li>Malicious\nintention to deceive the investor.<\/li>\n\n\n\n<li>Public.<\/li>\n\n\n\n<li>Lending\navenues, thereby resulting in financial gains to the company or the\nindividual.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p><strong><em>Most corporate frauds occur in the form\nof;&nbsp;<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>Money\nLaundering<\/li>\n\n\n\n<li>Asset\nmisappropriation<\/li>\n\n\n\n<li>Regulatory\nnon-compliance<\/li>\n\n\n\n<li>Accounting\nfrauds<\/li>\n\n\n\n<li>Frauds\nat the Senior management level<\/li>\n<\/ul>\n\n\n\n<p>The practices mentioned above has dented the\nimage of our financial infrastructure. The companies are henceforth required to\nbe watchful and cautious about these issues &amp; concerns. They ought to\nembrace anti-fraud measures as opposed to being reactive.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Possible_remedies_to_ethical_issues_hampering_Corporate_Governance\"><\/span>Possible\nremedies to ethical issues hampering Corporate Governance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The following factors can help alleviate ethical issues:<\/strong><\/em><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"997\" height=\"337\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Possible-remedies-to-ethical-issues-hampering-Corporate-Governance.png\" alt=\"Possible remedies to ethical issues hampering Corporate Governance\" class=\"wp-image-31050\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Possible-remedies-to-ethical-issues-hampering-Corporate-Governance.png 997w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Possible-remedies-to-ethical-issues-hampering-Corporate-Governance-300x101.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Possible-remedies-to-ethical-issues-hampering-Corporate-Governance-768x260.png 768w\" sizes=\"(max-width: 997px) 100vw, 997px\" \/><\/figure><\/div>\n\n\n<h3 class=\"wp-block-heading\">Robust Risk Management Framework<\/h3>\n\n\n\n<p>The erstwhile financial crisis has compelled financial and non-financial institutions to adopt a robust <em><strong>risk management<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Risk_management\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> framework. Financial institutions, in particular, give more stress on financial risks like credit, market risks, and liquidity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Data Management &amp; Analysis<\/h3>\n\n\n\n<p>The ability of the company to reap revenue,\nhandle expenses, and manage risks is reflected in its ability to spare, store,\n&amp; retrieve the ever-growing data. Seamless management of data can help to\nfoster a large customer base, thereby improving the ROI of the company.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Forensic accounting<\/h3>\n\n\n\n<p>As the name suggests, Forensic accounting deals\nwith the accountancy profession wherein accountants inculcate their skill\nrelated to auditing, accounting, and investigations to identify malpractices,\nfrauds, &amp; other litigations. Forensic accounting is yet to achieve good\ntraction in the banking sector despite its effectiveness in probing corporate\nfrauds.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Internal &amp; External Control System<\/h3>\n\n\n\n<p>The internal control system envisages continual\nimprovement of the operational framework via inculcation of apt policies and\nprocedures for the smoother functioning of the business. It helps lessen\nseveral forms of risk like unauthorized transactions, frauds, and poor\nmaintenance of accounts which can compromise the company&#8217;s financial\nperformance.&nbsp;<\/p>\n\n\n\n<p>External control system entails the government regulations,\npublic release &amp; assessment of financial statements, market competition.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Role of Independent auditor&nbsp;<\/h3>\n\n\n\n<p>The fundamental goal of evaluating a set of\ncodes for corporate Governance is to improve the auditing protocol to preserve\nthe stakeholders&#8217; interest. The auditor possesses the right to question the\ndefaulter, discard prejudice from the company&#8217;s fiscal report. Lately, a lot of\nstress has been given to the auditor role in the context of Corporate\nGovernance. It is because these officials are accountable for identifying\nscams.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Whistleblowing Policy<\/h3>\n\n\n\n<p>It is an essential part of the organization&#8217;s\ncorporate governance strategy. Such policies empower employees to exercise\ntheir rights to report any misconduct and suspicious activities to the management\nwhich are against the company&#8217;s interest.<\/p>\n\n\n\n<p><strong><em>Key takeaway:<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>Corporate\nGovernance is the structure of practices, rules, &amp; processes used to direct\nand control an organization.&nbsp;<\/li>\n\n\n\n<li>A\ncompany&#8217;s BODs is the primary force fostering corporate Governance.<\/li>\n\n\n\n<li>Bad\ncorporate Governance can lead a company to a state of vagueness which will\neventually hamper its profitability.&nbsp;&nbsp;<\/li>\n\n\n\n<li>Corporate\nGovernance entails the areas of ethical behaviour, environmental awareness,\ncompensation, corporate strategy, and risk management.&nbsp;<\/li>\n\n\n\n<li>The\nfundamental principles of Corporate Governance are transparency,\nresponsibility, and fairness.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Having a robust and transparent corporate governance in NBFC (Non-Banking Financial Companies) is essential. It not only alleviates the pressing issues but also fosters a healthy relationship with investors and clients. Good Corporate Governance in NBFC is must-have requirements as it is the only way to stay ahead of pressing issues and operates seamlessly.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/rbi-to-limit-funding-in-nbfcs-from-non-compliant-financial-action-task-force-nations\/\">RBI to limit funding in NBFCs from Non-compliant Financial Action Task Force Nations\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Corporate Governance refers to a set of system, principles &amp; process by which an organization is governed. It underpins guidelines as to how an organization can be directed to meet its goals such that it adds value and is beneficial for shareholder as well. Since corporate Governance also set up a framework for attaining an [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":31044,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[1768],"acf":{"service_id":"8"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":6827,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/31013"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=31013"}],"version-history":[{"count":34,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/31013\/revisions"}],"predecessor-version":[{"id":67640,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/31013\/revisions\/67640"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/31044"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=31013"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=31013"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=31013"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}