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15 Warning Signs That Could Put Your NBFC License at Risk

  • 15-Sep-2025
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15 Warning Signs That Could Put Your NBFC License at Risk

Every year, the Reserve Bank of India (RBI) cancels licenses of several Non-Banking Financial Companies (NBFCs). Interestingly, most of these cancellations are not due to fraud, but result from non-compliance, weak financials, or failure to follow RBI directives.

If you manage an NBFC, it’s crucial to keep an eye on these warning signs to ensure your operations remain compliant. Here are 15 red flags that could jeopardize your NBFC license:

Key Factors That Can Endanger Your NBFC License

  1. Ignoring RBI Guidelines: Failing to implement circulars, notifications, or regulatory instructions.

  2. Weak Financial Health: Insufficient capital, poor net owned funds, or unsustainable operations.

  3. KYC & AML Lapses: Non-adherence to Know Your Customer (KYC) and Anti-Money Laundering (AML) rules.

  4. Late or Inaccurate Reporting: Delayed or incorrect submission of financial statements to the RBI.

  5. High Non-Performing Assets (NPAs): Excessive bad loans without proper provisioning.

  6. Poor Corporate Governance: Weak board oversight, lack of internal controls, or transparency issues.

  7. Operational Failures: Ineffective risk management systems or technology breakdowns.

  8. Fraud or Mismanagement: Cases of significant operational fraud or managerial negligence.

  9. Violation of Lending Norms: Breaching exposure limits, interest rate caps, or loan disbursal policies.

  10. Unclear Ownership Structure: Ambiguity in promoters, shareholders, or beneficial ownership.

  11. Failure to Maintain Required Reserves: Not keeping minimum statutory reserves or funds.

  12. Non-Cooperation During Inspections: Ignoring RBI audits or inspections.

  13. Unethical Practices: Misleading clients, investors, or stakeholders.

  14. Outdated Policies: Internal policies not updated to reflect current RBI guidelines.

  15. Neglecting RBI Warnings: Failing to address regulatory observations or comply with directives.

Stay Compliant to Protect Your NBFC

Ensuring compliance with RBI regulations is essential to protect your license and maintain trust among clients, investors, and stakeholders.

If you need guidance on NBFC compliance, KYC, AML, or regulatory reporting, our experts are here to help. Get a free consultation today.

📞 +91 93113 47006

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