{"id":266255,"date":"2022-04-30T16:30:02","date_gmt":"2022-04-30T11:00:02","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=266255"},"modified":"2022-04-30T13:44:25","modified_gmt":"2022-04-30T08:14:25","slug":"regulating-nbfcs-nomination-and-remuneration-committees-via-guidelines-on-compensation-of-key-managerial-personnel-kmp-and-senior-management-in-nbfcs","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2022\/04\/30\/regulating-nbfcs-nomination-and-remuneration-committees-via-guidelines-on-compensation-of-key-managerial-personnel-kmp-and-senior-management-in-nbfcs\/","title":{"rendered":"Regulating NBFCs\u2019 Nomination and Remuneration Committees via Guidelines on Compensation of Key Managerial Personnel (KMP) and Senior Management in NBFCs"},"content":{"rendered":"<p style=\"text-align: justify;\">On 29<sup>th<\/sup> April 2022, Reserve Bank of India <strong>(RBI)<\/strong>, issued guidelines on <strong>Key Managerial Personnel (KMP) and Senior Management in NBFCs. <\/strong>These guidelines intend to provide regulating framework to <strong>Non-Banking Financial Company<\/strong> (NBFCs) and their Nomination and Remuneration Committees\u00a0(<strong>NRCs<\/strong>).<\/p>\n<p style=\"text-align: justify;\">These guidelines shall come into effect from April 01, 2023.<\/p>\n<p style=\"text-align: justify;\">\n<p style=\"text-align: justify;\"><strong>Key points:<\/strong><\/p>\n<ul style=\"text-align: justify;\">\n<li><strong>Non-Banking Financial Company<\/strong>\u00a0(<strong>NBFC<\/strong>) support real economic activity and regulate supplemental channel of credit intermediation alongside. After the revised <strong>Scale Based Regulatory (SBR) Framework<\/strong>, back in <u>22 October, 2021<\/u>, different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, etc., it was decided to issue an integrated regulatory framework for NBFCs under <strong>SBR<\/strong> providing a holistic view of the SBR structure, to set regulations being introduced and respective timelines.<\/li>\n<li>These guidelines will be applicable to all the KMPs (defined under Section 2 (51) of Companies Act, 2013), except the ones under \u2018Base Layer\u2019 and Government owned NBFCs.<\/li>\n<li>The NBFCs have to act in accordance to the Board approved compensation policy. This will include-<\/li>\n<\/ul>\n<p style=\"text-align: justify; padding-left: 40px;\">(a) constitution of a Remuneration Committee<\/p>\n<p style=\"text-align: justify; padding-left: 40px;\">(b) principles for fixed\/ variable pay structures<\/p>\n<p style=\"text-align: justify; padding-left: 40px;\">(c) malus\/ clawback provisions<\/p>\n<p style=\"text-align: justify;\">\n<ul>\n<li>NRCs will be constituted under <strong>Sec.178 of the Companies Act, 2013<\/strong>, which will work in close co-ordination with <strong>Risk Management Committee (RMC). <\/strong>It will ensure that \u201c<strong>fit and proper<\/strong>\u201d status of directors is maintained to achieve effective functioning of appointments and conflict resolution of the directors\/KMPs\/senior management.<\/li>\n<li><strong>Components and risk alignment of the Principles: <\/strong>The risk cover and compensation should be reasonably evaluated by the KMPs. Compensation packages include-<\/li>\n<li style=\"list-style-type: none;\">\n<ol>\n<li><strong>Composition of Fixed Pay- <\/strong>Under the provisions of <strong>Para 2.2 of the Annex,<\/strong> fixed compensation will be including\u00a0the perquisites and contributions towards superannuation\/retirement benefits, along with monetary equivalent of benefits of non-monetary nature, etc.<\/li>\n<li><strong>Composition of Variable Pay: <\/strong>Under the provisions of <strong>Para 2.3.1 of the Annex, <\/strong>variable compensation will be including share-linked instruments, or a mix of cash and share-linked instruments.<\/li>\n<\/ol>\n<\/li>\n<li>The deferred compensation may be subject to malus\/clawback\u00a0arrangements in the event of subdued or negative financial performance of the company and\/or the relevant line of business or employee misconduct in any year. NBFCs may also specify a period during which malus and\/or clawback can be applied, covering at least the deferral and retention periods.<\/li>\n<li style=\"text-align: justify;\">The committee has to ensure the risk management and Compensation levels are regulated under Internal Capital Adequacy Assessment Process (ICAAP).<\/li>\n<li style=\"text-align: justify;\"><strong>Guaranteed bonus:<\/strong> Only new hiring joining\/sign-on will be paid the bonus, which neither will be part of fixed or variable payments.<strong>\u00a0<\/strong><\/li>\n<li style=\"text-align: justify;\">Guaranteed bonus will not be paid to KMPs and senior management.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h4 style=\"text-align: justify;\">*Shubhi Srivastava, Editorial Assistant has reported this brief.<\/h4>\n","protected":false},"excerpt":{"rendered":"<p>On 29th April 2022, Reserve Bank of India (RBI), issued guidelines on Key Managerial Personnel (KMP) and Senior Management in NBFCs. These <\/p>\n","protected":false},"author":121,"featured_media":265081,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[4,1193],"tags":[],"class_list":["post-266255","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legislationupdates","category-notifications"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Regulating NBFCs\u2019 Nomination and Remuneration Committees via Guidelines on Compensation of Key Managerial Personnel (KMP) and Senior Management in NBFCs | SCC Times<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2022\/04\/30\/regulating-nbfcs-nomination-and-remuneration-committees-via-guidelines-on-compensation-of-key-managerial-personnel-kmp-and-senior-management-in-nbfcs\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Regulating NBFCs\u2019 Nomination and Remuneration Committees via Guidelines on Compensation of Key Managerial Personnel (KMP) and Senior Management in NBFCs\" \/>\n<meta property=\"og:description\" content=\"On 29th April 2022, Reserve Bank of India (RBI), issued guidelines on Key Managerial Personnel (KMP) and Senior Management in NBFCs. 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2021","format":false,"excerpt":"RBI issues revised Regulatory Framework for NBFCs: Scale Based Regulation (SBR). These guidelines shall be effective from October 01, 2022. The instructions relating to ceiling on IPO funding given vide para 3.1(d) of the Annex shall come into effect from April 01, 2022. Pursuant to the announcement made in the\u2026","rel":"","context":"In &quot;Legislation Updates&quot;","block_context":{"text":"Legislation Updates","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":257142,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/11\/16\/rbi-introduces-internal-ombudsman-mechanism-for-select-non-banking-financial-companies-nbfcs\/","url_meta":{"origin":266255,"position":1},"title":"RBI introduces internal ombudsman mechanism for select Non-Banking Financial Companies (NBFCs)","author":"Bhumika Indulia","date":"November 16, 2021","format":false,"excerpt":"On November 15, 2021, the Reserve Bank has directed Deposit-taking NBFCs (NBFCs-D) with 10 or more branches and Non-Deposit taking NBFCs (NBFCs-ND) with asset size of Rs.5,000 crore and above having public customer interface to appoint Internal Ombudsman (IO) at the apex of their internal grievance redress mechanism within a\u2026","rel":"","context":"In &quot;Legislation Updates&quot;","block_context":{"text":"Legislation Updates","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/08\/rbi_2.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":250479,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/06\/30\/rbi-issues-guidelines-on-declaration-of-dividends-by-nbfcs\/","url_meta":{"origin":266255,"position":2},"title":"RBI issues guidelines on declaration of dividends by NBFCs","author":"Prachi Bhardwaj","date":"June 30, 2021","format":false,"excerpt":"The Reserve Bank of India has issued circular dated June 24, 2021 prescribing the guidelines on distribution of dividend by NBFC\u2019s. The guidelines shall be applicable to all NBFCs regulated by RBI and shall be effective for declaration of dividend from the profits of the financial year ending March 31,\u2026","rel":"","context":"In &quot;Legislation Updates&quot;","block_context":{"text":"Legislation Updates","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":229910,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/05\/21\/cabinet-approves-special-liquidity-scheme-for-nbfcs-hfcs-to-address-their-liquidity-stress\/","url_meta":{"origin":266255,"position":3},"title":"Cabinet approves Special Liquidity Scheme for NBFCs\/HFCs to address their Liquidity Stress","author":"Bhumika Indulia","date":"May 21, 2020","format":false,"excerpt":"Union Cabinet, has given its approval to the proposal of the Ministry of Finance to launch a new Special Liquidity Scheme for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) to improve liquidity position of the NBFCs\/HFCs. Financial implication: The direct financial implication for the Government is Rs. 5\u2026","rel":"","context":"In &quot;Cabinet Decisions&quot;","block_context":{"text":"Cabinet Decisions","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/cabinet_decisions\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/02\/CABINET-SECRETARIAT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/02\/CABINET-SECRETARIAT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/02\/CABINET-SECRETARIAT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/02\/CABINET-SECRETARIAT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/02\/CABINET-SECRETARIAT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":265719,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/04\/21\/rbi-mandates-nbfc-to-make-additional-disclosure-in-financial-statements\/","url_meta":{"origin":266255,"position":4},"title":"RBI mandates NBFC to make additional disclosure in financial statements","author":"Bhumika Indulia","date":"April 21, 2022","format":false,"excerpt":"On April 19, 2022, the Reserve Bank of India has mandated NBFCs to make additional disclosure in financial statement in accordance with the existing prudential guidelines, applicable accounting standards, laws, and regulations.\u00a0The additional disclosure requirements for NBFCs are in accordance with the SBR framework and are outlined HERE. These disclosures\u2026","rel":"","context":"In &quot;Legislation Updates&quot;","block_context":{"text":"Legislation Updates","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":265084,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/04\/06\/rbi-notifies-net-owned-fund-for-nbfcs-to-commence-business\/","url_meta":{"origin":266255,"position":5},"title":"RBI notifies net owned fund for NBFCs to commence business","author":"Bhumika Indulia","date":"April 6, 2022","format":false,"excerpt":"The Reserve Bank of India has specified ten crore rupees as net owned fund (NOF) required for following categories of non- banking financial companies to commence or carry on the business of non-banking financial institution from October 01, 2022: (a) Non-banking financial company \u2013 Investment and Credit Company (NBFC-ICC); (b)\u2026","rel":"","context":"In &quot;Legislation Updates&quot;","block_context":{"text":"Legislation Updates","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/04\/MicrosoftTeams-image-147.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/266255","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/121"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=266255"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/266255\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/265081"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=266255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=266255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=266255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}