Compensation of key managerial personnel in NBFCs needs to be reasonable: RBI

The Reserve Bank of India has recommended that non-banking finance companies (NBFCs) form a nomination and remuneration committee (NRC), as it seeks to rationalise compensation of key managerial personnel. The regulator also suggested that non-bank entities do not offer any guaranteed bonus to senior management people.

“The NRC, inter alia, shall also have the mandate to oversee the framing, review and implementation of compensation policy of the company which should have the approval of the board,” it said in a notification Friday.

NBFCs can consider bonuses to new hires. But such bonus will neither be considered a part of fixed pay nor of variable pay.


The guidelines are intended only for providing a broad guidance to NBFCs and their NRCs in formulating their compensation policy. While formulating the compensation policy, it has to be ensured that all statutory mandates and the rules and directions issued under them are fully complied with.

The proportion of variable pay in total compensation, according to the RBI, needs to be commensurate with the role and prudent risk-taking profile of key senior management.