RBI recently mandated that the NBFCs must constitute

Solution

RBI issued guidelines for compensation of key managerial personnel and senior management of non-banking finance companies, RBI said that the finance companies have to constitute a nomination and remuneration committee (NRC), which will have the mandate to oversee the framing, review and implementation of compensation policy of the company with the approval of the board. NRC may ensure that compensation levels are supported by the need to retain earnings of the company and the need to maintain adequate capital based on Internal Capital Adequacy Assessment Process (ICAAP). ICAAP (Internal Capital Adequacy Assessment Process) notifies the Board of the current assessment of the bank's risks, how the bank plans to alleviate those risks, and the quantity of current and future capital is needed.