NBFC Growth Approval Scorecard - For Board / Audit & Risk Committee governance Use

Purpose:To objectively assess whether a proposed growth rate is prudent, fundable, controllable, and survivable under stress.

Yesterday's blog was focussed on the Growth approval philosophy. Today i am building further detailed blocks on how NBFC Board members can take a structured governance call on growth strategy.

How to Use:

• Score each category from 1 (Weak) to 5 (Strong)

• Apply the weighting

• Compute the weighted score

• Use the decision matrix before approving growth

1. Growth Rationale & Strategy (Weight: 15%)

Score	Descriptor
5	Growth aligned to core franchise; conservative assumptions
4	Logical expansion with moderate assumptions
3	Growth partly opportunistic
2	Growth driven mainly by market momentum
1	Growth justified only by peer comparison

Score: ⬜ /5 → Weighted: ⬜ × 15%

2. Asset Quality & Credit Discipline (Weight: 20%)

Score	Descriptor
5	Vintage-wise stability; conservative loss assumptions
4	Minor deterioration; well explained
3	Flat GNPA masking early stress
2	Increasing restructuring / rollovers
1	Credit assumptions materially optimistic

Score: ⬜ /5 → Weighted: ⬜ × 20%

3. Liquidity & Funding Sustainability (Weight: 25%)

Score	Descriptor
5	Fully matched funding; diversified sources
4	Minor mismatches; strong buffers
3	Dependence on short-term instruments
2	Concentrated funding / CP reliance
1	Growth precedes funding certainty

Score: ⬜ /5 → Weighted: ⬜ × 25%

4. Capital Adequacy & Buffer Strength (Weight: 15%)

Score	Descriptor
5	Capital well above internal targets
4	Adequate buffers post-growth
3	Capital close to comfort levels
2	Capital depends on future raise
1	Growth risks breaching thresholds

Score: ⬜ /5 → Weighted: ⬜ × 15%

5. Risk Management & Controls (Weight: 10%)

Score	Descriptor
5	Controls scaled ahead of growth
4	Controls scale with growth
3	Controls catching up
2	Audit flags unresolved
1	Control environment stretched

Score: ⬜ /5 → Weighted: ⬜ × 10%

6. Concentration & Correlation Risk (Weight: 10%)

Score	Descriptor
5	Diversification improving
4	Concentration stable
3	Mild increase in concentration
2	High correlated exposure
1	Single-sector dependency

Score: ⬜ /5 → Weighted: ⬜ × 10%

7. Governance & Documentation Quality (Weight: 5%)

Score	Descriptor
5	Clear challenge; dissent documented
4	Robust discussion recorded
3	Limited challenge
2	Procedural approval
1	No evidence of oversight

Score: ⬜ /5 → Weighted: ⬜ × 5%

TOTAL SCORE CALCULATION

Maximum Score: 5.0Your Score: ⬜⬜ / 5.0

Decision Matrix

Final Score	Board Action
≥ 4.2	Approve growth
3.5 – 4.19	Approve with conditions
3.0 – 3.49	Defer; seek mitigation
< 3.0	Do not approve

Mandatory Conditions (if applicable)

☐ Funding committed in advance

☐ Quarterly Board review of growth metrics

☐ Tighter concentration limits

☐ Independent ALM / credit review

☐ Growth cap triggers defined

Director Protection Statement (Recommended)

“The Board has reviewed the growth proposal using a structured risk-based framework, evaluated downside scenarios, and approved the growth subject to the conditions and monitoring mechanisms outlined above.”

Key RBI Lens for Supervisors

• Is growth supported by liquidity and capital?

• Are risks recognised early?

• Did the Board challenge assumptions?

• Is the decision documented?

Bottom Line for Directors

Growth that cannot be funded, controlled, or slowed is not growth—it is risk accumulation.