{"id":5029,"date":"2021-05-11T05:56:44","date_gmt":"2021-05-11T05:56:44","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=5029"},"modified":"2021-05-11T05:58:07","modified_gmt":"2021-05-11T05:58:07","slug":"corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds\/","title":{"rendered":"Corporate Governance in NBFCs and How it Tackles Corporate Frauds?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Corporate Governance in NBFCs is dissimilar and unique. It is due to its activities are less transparent. Furthermore, such financial institutions differ from many other companies or entities when it comes to the difficulty and range of their business risks. Hence, the structure of corporate business in <a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\"><strong>NBFCs<\/strong><\/a> is vital, and it must be enhanced.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a54f53264774\" class=\"ez-toc-cssicon-toggle-label\"><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><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a54f53264774\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds\/#An_Overview_of_Corporate_Governance_in_NBFC\" title=\"An\nOverview of Corporate Governance in NBFC\">An\nOverview of Corporate Governance in NBFC<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds\/#Importance_of_Corporate_Governance_in_NBFCs\" title=\"Importance of Corporate Governance in\nNBFCs\">Importance of Corporate Governance in\nNBFCs<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds\/#Current_steps_by_NBFCs_for_improved_Corporate_Governance_in_NBFCs\" title=\"Current\nsteps by NBFCs for improved Corporate Governance in NBFCs\">Current\nsteps by NBFCs for improved 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-4\" href=\"https:\/\/swaritadvisors.com\/blog\/corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds\/#Moral_Issues_in_Corporate_Governance\" title=\"Moral\nIssues in Corporate Governance\">Moral\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-5\" href=\"https:\/\/swaritadvisors.com\/blog\/corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds\/#How_to_solve_such_moral_issues_facing_corporate_Governance_in_NBFCs\" title=\"How to\nsolve such moral issues facing corporate Governance in NBFCs?\">How to\nsolve such moral issues facing 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-6\" href=\"https:\/\/swaritadvisors.com\/blog\/corporate-governance-in-nbfcs-and-how-it-tackles-corporate-frauds\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"An_Overview_of_Corporate_Governance_in_NBFC\"><\/span>An\nOverview of Corporate Governance in NBFC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It\nmeans the set of process, systems, and principles by which an entity is\ngoverned. They lay down the procedures as to how an entity can be directed and\ncontrolled in a way that it can execute its goals and objectives such that it\nadds to the company\u2019s value and is useful for stakeholders also.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Importance_of_Corporate_Governance_in_NBFCs\"><\/span>Importance of Corporate Governance in\nNBFCs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The following factors can conclude the importance of corporate Governance in NBFCs:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"630\" height=\"580\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-15.png\" alt=\"Importance of Corporate Governance in NBFCs\" class=\"wp-image-5030\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-15.png 630w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-15-300x276.png 300w\" sizes=\"(max-width: 630px) 100vw, 630px\" \/><\/figure><\/div>\n\n\n\n<ol><li><strong><em>&nbsp;Necessary for Mergers and Acquisitions<\/em><\/strong>: Corporate Governance in NBFCs is vital, especially during restructuring events such as mergers and acquisitions. It aids an entity or a company to distinguish between good or bad deals. <a href=\"https:\/\/swaritadvisors.com\/mergers-and-acquisitions\" class=\"text-primary\"><strong>Mergers and Acquisitions<\/strong><\/a> can also progress the quality of Corporate Governance.<\/li><li><strong><em>Risk Mitigation and Compliance<\/em><\/strong>: Governance, risk mitigation, and compliance concerning each other. An entity or a company is governed by principles that work precisely to make sure that compliance is unstated on the company lawfully. If a company stays well-organized in its operations, it can be undertaken any risk arising out of any events, whether technological or economical.<\/li><li><strong><em>Improves Organizational Efficiency<\/em><\/strong>: Such corporate Governance plays an essential role in determining industrial competitiveness. Enhanced corporate Governance in NBFCs delivers enhanced corporate performance and also gives improved financial results.<\/li><li><strong><em>Fortify Shareholder Value<\/em><\/strong>: Corporate Governance fortifies the shareholder contentment.&nbsp; It is vital to protect the valuations of a company as the primary aim of corporate Governance is to get the most out of the shareholders&#8217; concerns.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Current_steps_by_NBFCs_for_improved_Corporate_Governance_in_NBFCs\"><\/span>Current\nsteps by NBFCs for improved Corporate Governance in NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nare the current steps by Non-Banking Financial Companies in India for corporate\nGovernance in NBFCs:<\/p>\n\n\n\n<ul><li>Introduction of citizen\u2019s deed or agreement in NBFCs;<\/li><li>Duty of the BODs (Board of Directors) and top level of Management for good Corporate Governance;<\/li><li>Constitution of committees like ALM or Asset Liability Management Committee, Management, and investor&#8217;s complaints committee;<\/li><li>Implementation of the idea of Know Your Customer (KYC);<\/li><li>Continuing implementation of prudential norms as mentioned by<strong> RBI (Reserve Bank of India<\/strong><sup><a href=\"https:\/\/www.rbi.org.in\/\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup><strong>).<\/strong><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Moral_Issues_in_Corporate_Governance\"><\/span>Moral\nIssues in Corporate Governance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Corporate\nfraud is a word used to indicate a scam or fraud that occurs within a company\nby its owners or managers and involves on purpose dishonesty to trick the investors,\ngeneral public, or lending institutions, thereby resulting in monetary gains to\nthe people or to an organization.<\/p>\n\n\n\n<p>Most\nof the corporate frauds come into the category of asset cheating, money\nlaundering &amp; frauds done by any senior management, accounting frauds and\nregulatory non-compliance.<\/p>\n\n\n\n<p>The practices mentioned above harm the image of our monetary and economic system. Organizations are needed to be thoughtful and cautious about such concerns and issues. They must adopt pro-active and anti-fraud method as opposed to being reactive.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_solve_such_moral_issues_facing_corporate_Governance_in_NBFCs\"><\/span>How to\nsolve such moral issues facing corporate Governance in NBFCs?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following are some vital factors that can be the key to solve such issues:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"647\" height=\"368\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-16.png\" alt=\"issues facing corporate Governance in NBFCs\" class=\"wp-image-5032\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-16.png 647w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-16-300x171.png 300w\" sizes=\"(max-width: 647px) 100vw, 647px\" \/><\/figure><\/div>\n\n\n\n<ol><li><strong>Data Examine and Management<\/strong>: The ability of an organization to create revenue, manage expenses and vindicate risks are recognized by their ability or retain, retrieve, store, and share the rising data. Efficient data management can attract a massive customer base and enhance customer relationship and thereby earning more revenue.<\/li><li><strong>Forensic Accounting<\/strong>: It is a field concerning the accountancy profession wherein accountants execute their accounting skills, investigatory, and auditing skills to find out the bankruptcy, frauds, and other litigations. The responsibility of such forensic accountants in searching for corporate frauds has been broadly spoken about. But, it&#8217;s still in its early stages in India.<\/li><li><strong>The Policy of Whistle Blowing<\/strong>: It is taken as a precious tool in an organization&#8217;s corporate governance plan. It defines the internal policy designed to provide employees with the option of reporting any suspicious activity to the Management, which amounts to the violation of the company&#8217;s norms or code of conduct.<\/li><li><strong>Sound Risk Management Structure<\/strong>: Because of the happening of major financial losses, a lot of importance is given to the reinforcement of the practices of risk management for financial and non-financial institutions, in the case of financial institutions, much consideration to the financial risk such as credit, market risk and liquidity.<\/li><li><strong>Code of Conducts for BODs<\/strong>: Individual has often questioned the requirement for the corporate board, but time &amp; again it has been proven that its presence has made the difference during an organizational emergency.<\/li><li><strong>External and Internal Control System<\/strong>: The permitted procedure and policies followed by the Management to bring out some smooth and correct operation of the business is the meaning of Internal Control System. It aids in avoiding different forms of risks, such as improper maintenance of accounts, scams, and unapproved transactions, which can harm the financial performance of an organization.<\/li><li><strong>Role of Independent Auditor<\/strong>: The primary purpose of formulating a set of codes for corporate Governance in NBFCs is to improve the auditing process to hold the interest of all inventors &amp; stakeholders. The auditor holds the authority to detain the offender, remove bias from the financial report of the company and impartially report. A lot of importance has been given to the role of an auditor concerning corporate Governance. It is because auditors are legally responsible for detecting frauds.<\/li><\/ol>\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 robust corporate Governance in NBFCs is vital. It will also aid in tackling some of the significant ethical facing corporate Governance. The Corporate Governance in NBFCs is dissimilar and unique. It is due to its activities are less transparent.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/differences-between-fintech-and-nbfc\/\">What are the Key Differences Between Fintech and NBFC?\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Corporate Governance in NBFCs is dissimilar and unique. It is due to its activities are less transparent. Furthermore, such financial institutions differ from many other companies or entities when it comes to the difficulty and range of their business risks. Hence, the structure of corporate business in NBFCs is vital, and it must be [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":5035,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58],"tags":[635],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/5029"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=5029"}],"version-history":[{"count":19,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/5029\/revisions"}],"predecessor-version":[{"id":5051,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/5029\/revisions\/5051"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/5035"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=5029"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=5029"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=5029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}