Is Pay Pressure Leading NBFCs Down a Risky Path?

A recent tragedy involving a 42-year-old area manager from a private finance company in Jhansi has sparked serious concerns about the intense pressures some employees face in India's financial sector. The manager allegedly took his own life after facing relentless demands from his superiors to meet steep loan recovery targets, as revealed in his suicide note. His family claims that the excessive work pressure amounted to "mental torture." Two senior executives of the company have been charged with abetment to suicide, and the company has suspended them while the investigation is ongoing.

This incident draws attention to broader issues within India’s rapidly growing non-banking financial companies (NBFCs), which have been key to promoting financial inclusion but are also under increasing scrutiny for their aggressive business practices. As some NBFCs chase rapid growth, employees are often pressured to meet high-performance targets, which can lead to a toxic work environment.

The Reserve Bank of India (RBI) has taken note of these risky practices. RBI Governor Shaktikanta Das recently urged NBFCs to review their incentive structures and focus on sustainable growth, warning that overly target-driven models not only harm employees but could also lead to poor customer service and financial instability. Das emphasized that while the sector is overall healthy, some companies are pursuing profits at the expense of both their workers and customers by imposing high-interest rates, hidden fees, and unfair penalties.

Das also raised concerns about the "push effect" in lending, where targets, rather than real customer demand, drive credit growth. This can lead to short-term profits but risks long-term financial health for both the company and its borrowers. As the RBI continues to monitor these trends, it is clear that the NBFC sector needs to find a balance between growth and responsible practices to avoid more tragic outcomes like the one seen in Jhansi.