MC Exclusive | RBI tells PTC India Financial Chairman to fix gaps in governance, operations, compliance  

The RBI conducted an off-site assessment and ISE of PFS, under Section 45N of the RBI Act, 1934, from December 7 to 21, 2022. Based on this, the RAR and IR were sent to the company on August 17, 2023.

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26 Aug, 2025 12:21

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The Reserve Bank of India (RBI) has written a letter to the chairman of PTC India Financial Services Ltd (PFS), asking the board and the management to pay immediate attention to “critical gaps” in governance, compliance, business, and operational risk discovered in supervisory assessment.

Moneycontrol has reviewed the letter dated September 18 which flags concerns based on the inspection report (IR), risk assessment report (RAR), and a supervisory meeting held on September 6.

“The supervisory assessment highlights critical gaps in governance and oversight, business risk, compliance culture, operational risk, and IT and cyber security issues. We would like to highlight some of the major supervisory concerns based on the current cycle of ISE (Inspection for Supervisory Evaluation) which may need immediate attention of the board and the MD and CEO of the NBFC,” RBI said.

Moneycontrol has sent detailed email queries to PFS and the RBI, seeking their comments on the matter. There has been no response from either.

On September 22, 2023, Moneycontrol exclusively reported that RBI’s RAR and IR on PFS, as on March 31, 2022, had found that the company deviated from loan sanction norms and accorded “excessive discretionary power” to a former top official, raising concerns over risk management practices and the robustness of its governance framework.

The RBI conducted an off-site assessment and ISE of PFS, under Section 45N of the RBI Act, 1934, from December 7 to 21, 2022. Based on this, the RAR and IR were sent to the company on August 17, 2023.

The story so far

PTC, which was set up in 1999 as a public-private partnership, is part-owned by state run-power companies — NTPC, Power Grid Corporation of India, Power Finance Corporation of India, and NHPC each own 4.05 percent stake. Life Insurance Corporation owns 5.96 percent and Damodar Valley Corporation owns 3.38 percent in PTC.

PFS is the non-banking financial arm of PTC India (formerly Power Trading Corporation), which is partly owned by state run-power companies. The non-banking finance company (NBFC) has been mired in controversy since January 2022, when three independent directors resigned citing corporate governance issues.

Since then, RBI and the Securities and Exchange Board of India (SEBI) have been probing the company. The Registrar of Companies (ROC), an office under the Ministry of Corporate Affairs, on June 27, issued three separate adjudication orders penalising PFS and former Managing Director and Chief Executive Officer Pawan Singh, after finding their actions in violation of the Companies Act, 2013.

Separately, SEBI issued a show cause notice on May 8 to PTC India Chairman Rajib Mishra (also chairman of PFS) and Pawan Singh for alleged corporate governance lapses at PFS. SEBI held Mishra and Singh responsible for corporate governance lapses due to their influence within PFS.

Singh was sent on leave at the end of June on an RBI directive. Mishra’s appointment as CMD of parent company PTC was approved on June 28, backed by state-run shareholders, despite regulatory scrutiny of the process.

Irregularities in appointments

In the letter, RBI points out that irregularities were observed in the appointment of the company secretary and independent directors.

This refers to the findings of the RAR regarding the appointment of the company secretary on  November 17. This appointment was done by an independent committee despite objections from the Nomination and Remuneration Committee (NRC). The appointment was done by diluting the job specifications as against the specifications in the advertisement, and candidates were called for interview at short notice, RBI said.

RBI’s RAR also highlights that the appointment of fresh independent directors was placed before  the board at a meeting on June 25th as an additional agenda. At the time, independent directors had objected that this had been done in haste and on a day when one of the independent directors was on leave. Despite two independent directors conveying strong objections and voting against the agenda,  the chairman of the committee and the management voted in favour.

Board review and action

RBI has directed the board to review the governance issues highlighted in the resignation letters of the independent directors who resigned in January 2022, and thereafter in November and December 2022. Additionally, the central bank has also asked them to look into irregularities in appointments, excessive powers granted to the MD and CEO, and delays in finalising annual accounts.

RBI has asked the company to put in place better management of non-performing assets and strengthen the information systems for informed decision-making. Referring to the concerns over “excessive discretionary powers” given to the former MD and CEO, RBI has directed the board to review these powers and define accountability in the loan sanctioning process.

The RBI letter includes a draft Risk Mitigation Plan (RMP) with timelines to address the identified concerns, and requests the company to conduct a board meeting within 30 days to discuss these matters and provide item-wise compliance / comments.