Corporate Governance Code

Preamble

Corporate Governance is the key to protecting the interests of the stake-holders in the corporate sector and has universal applicability. In order to enable NBFCs to adopt best practices and greater transparency in their operations Reserve Bank of India has from time to time proposed various guidelines for corporate governance for consideration by NBFCs. This policy will come into force immediately on adoption by the Board.

 

Board of Directors

The Board shall be responsible for exercising its business judgments to act in what it reasonably believes to be in the best interests of the Company and its shareholders. The Board of Directors along with its constituted Committees shall provide direction and guidance for the Company and shall further supervise and review the performance of the Company.

 

As the Directors occupy fiduciary position, they shall attend and actively participate in Board and its Committee meetings thereof, on which they serve, and shall properly discharge their responsibilities.

 

The Board shall be responsible for overall compliance with the Corporate Governance of the Company and oversee the business affairs including responsibility for the Company’s business strategy and financial soundness, key personnel decisions, internal organisation and governance structure and practices, Risk Management and compliance obligations and in doing so the Board must act honestly, in good faith and in the best interests of the Company.

 

The Board should ensure that the Company’s organisational structure enables the Board and Senior Management to carry out their responsibilities and facilitates effective decision making and good governance. This includes clearly laying out the key responsibilities and authorities of the Board itself, of Senior Management and of those responsible for the control.

 

The Board should actively engage in the major matters of the Company and keep up with material changes in the Company’s business and the external environment as well as act in a timely manner to protect the long-term interests of the Company.

 

The Board should ensure that transactions with related parties are reviewed to assess risk and are subject to appropriate resolutions/approval, as required under various applicable laws and that corporate or business resources of the Company are not misappropriated or misapplied.

 

Committees of the Board

In order to focus on the critical functions of the Company, the Board may constitute such Committees as and when required to ensure smooth functioning of the Company. The Board shall have the following Committees mandatorily:

  • Audit Committee;
  • Nomination and Remuneration Committee;
  • Risk Management Committee;
  • Asset Liability and Management Committee

The terms of reference of the above mentioned Committees shall be determined by the Board from time to time as per Companies Act, 2013 and other Applicable Laws.

 

The Terms of Reference, Composition, Meetings, Quorum, Minutes and Role of all the Committees shall be as decided by the Board of Directors from time to time subject to provisions contained in the RBI master directions, relevant provisions of the Companies Act, 2013 and other applicable laws applicable to the Company.

 

The Audit Committee will ensure that an Information System Audit of the internal systems and processes is conducted at least once in two years to assess operational risks faced by the Company.

 

Apart from the above Committees, the Board shall constitute such other Committees as may be deemed fit by it and, if required by any applicable law. The Committees may engage in any manner, from time to time such Experts as the Committees may decide for effective discharge of the Roles and Responsibilities of such Committees.

 

Fit and Proper criteria for Directors

The Company shall have a policy put in place for ascertaining the ‘fit and proper’ criteria at the time of appointment of Directors and on a continuing basis. The Nomination & Remuneration Committee (“NRC”) shall review the appointment/re-appointment of Directors considering their qualifications, expertise, track record, integrity and other ‘fit and proper’ criteria. The NRC should obtain such declarations/undertakings, deed of covenant from the Directors and ensure furnishing such statement and certificates as may be prescribed by the Policy for determining Fit and Proper Criteria in line with the Guidelines issued by the RBI for the time being in force.

 

A quarterly statement on change of directors (certified by the Auditors of the Company wherever required) and a certificate by the Managing Director of the Company certifying that ‘fit and proper’ criteria in selection of Directors has been followed by the Company should be furnished to the Regional Office of the RBI in terms of the Guidelines issued by the RBI for the time being in force.

 

Disclosure to the Board

The following disclosures shall be made to the Board of Directors at regular intervals (preferably once in a year) as may be prescribed by the Board in this regard:

  1. Progress made in putting in place a progressive risk management system, and risk management policy and strategy followed;
  2. Conformity with Corporate Governance standards viz. in composition of various Committees, their role and functions, periodicity of the meetings and compliance with coverage and review functions, etc.

 

Disclosure in the Financial Statements

In addition to the disclosures required to be made as per the Applicable Laws, the following additional disclosures shall be made in the annual financial statements in terms of the RBI Directions:

  1. Registration / licence / authorisation by whatever name called, obtained from other financial sector regulators;
  2. Ratings assigned by credit rating agencies and migration of ratings during the year;
  3. Penalties, if any, levied by any regulator;
  4. Information namely, area, country of operation and joint venture partners with regard to joint ventures and overseas subsidiaries; and
  5. Asset-liability profile, extent of financing of parent company products, Non Performing Assets (NPA) and movement of NPAs, details of all off-balance sheet exposures, structured products issued by them as also securitization/ assignment transactions and other disclosures.

Requisite disclosures as may be required under any Applicable Laws from time to time shall also be made in the Financial Statements.

 

Rotation of partners of the statutory auditors audit firm

Subject to the provisions contained in the Companies Act, 2013, the Auditors of the Company shall be appointed with the approval of the Shareholders at the Annual General Meeting as recommended by the Board of Directors of the Company based on the recommendation of the Audit Committee of the Company. The Auditors can be appointed for a period of 5 years and such appointment shall be ratified by the shareholders every year at the Annual General Meeting. Auditors can be appointed for a two consecutive term of 5 years.

 

The Company shall also comply with the RBI guidelines and provisions of the Companies Act, 2013 regarding rotation of partners of the Firm conducting Statutory Audit from time to time. As contained in the Directions, presently the Company is required to rotate the partner of the Chartered Accountant firm conducting the audit, every three years so that same partner does not conduct audit of the company continuously for more than a period of three years.

 

However, the partner so rotated will be eligible for conducting the audit of the company after an interval of three years, subject to approval of the shareholders and recommendations of the Board and Audit Committee of the Company. The Company shall also incorporate appropriate terms in the letter of appointment of the firm of auditors and ensure its compliance.

 

Review of Policy

The Board or its Committee may review the policy from time to time as may be required. Changes, if any, shall be effective only upon approval by the Board.