Deposit taking NBFCs' collection up despite RBI reluctance

There were 11,842 NBFCs registered with RBI out of which 220 were deposit-taking till March 31, 2015

With the Reserve Bank of India (RBI) tightening its noose around deposit taking non-banking financial companies (NBFC), public deposits of these companies grew six per cent to Rs 27,500 crore on a year-on-year basis as on March 31, 2015.

According to RBI data, as of March last year, there were 11,842 NBFCs registered with RBI, of which 220 were deposit-taking. However, the bigger source of funds for deposit-taking NBFCs, issuance of debentures, came down as the funds mobilised through it dropped from Rs 41,700 crore to Rs 40,800 crore between March 2014 and March 2015.

In November 2014, RBI had issued new regulations for deposit-taking NBFCs, under which it increased the minimum net-owned fund requirement for the companies eight-fold from Rs 25 lakh to Rs 2 crore by 2017 in a phased manner. Thus, the companies were required to have net owned fund of Rs 1 crore by March 2016, which needs to be increased to Rs 2 crore by March 2017. In addition, RBI said deposit-taking NBFCs have to mandatorily get investment grade credit rating for being eligible to accept public deposits.

While several big deposit-taking companies expect to meet the March 2016 deadline, some others might miss the deadline and be forced to shut shop. Many small companies had to stop deposit-taking activities as they were unable to get investment grade rating from credit rating agencies.

“Since November 2014, many small companies have stopped taking deposits. Moreover, of the 220 deposit-taking companies, 175 have net worth of Rs 50-60 lakh. It is extremely difficult for them to meet the Rs 2 crore net worth criteria. We have requested RBI to have a separate category of small NBFCs,” said Shiv Dayal Chugh, director, Finance Industry Development Council.

Some of the bigger companies, such as Shriram Transport Finance, too are reducing dependence on public deposits.

“Dependency on the deposit-taking arm has been coming down, as we have diversified our source of funding.  Moreover, the cost of public deposits is on the higher side. Last financial year, our growth in the public deposit segment was about 10 per cent,” said Umesh Revankar, managing director, Shriram Transport Finance.