Z Finance Pvt. Ltd. (Z) is a deposit taking Non-Banking Financial Company (NBFC-D) registered with the Reserve Bank of India (RBI) and incorporated on 7th January, 2020. Z is engaged in the business of lending and accept

The Reserve Bank of India, in the public interest and to regulate the credit system to the advantage of the country, issued directions known as the Non-Banking Financial Companies- Corporate Governance (Reserve Bank) Directions, 2015, relating to Corporate Governance vide Notification dated April 10, 2015 and vide master circular dated July 1, 2015. These Directions require every non-deposit accepting Non-Banking Financial Company with asset size of ₹500 crore and above (NBFCs-ND-SI), as per its last audited balance sheet, and all deposit accepting Non-Banking Financial Companies (NBFCs-D), henceforth called as Applicable NBFCs to constitute the following committees of the board: Audit Committee , consisting of not less than three members of its Board of Directors. And in accordance with the provisions of Section 177 of the Companies Act, 2013. The Audit Committee must ensure that an Information System Audit of the internal systems and processes is conducted at least once in two years to assess operational risks faced by the NBFCs. Nomination committee , to ensure 'fit and proper' status of proposed/existing directors with the same powers, functions and duties as laid down in Section 178 of the Companies Act, 2013. Risk Management committee , to manage the integrated risk, all Applicable NBFCs shall form a Risk Management Committee, besides the Asset Liability Management Committee. In the instant case, Z is a deposit accepting company and therefore, the statutory auditor is correct in advising that the company has to establish board committees as part of corporate governance compliance. If Z had been a non-deposit accepting NBFC, then it would have to comply with the RBI corporate governance criteria only when its assets size is ₹500 crore and above.