Non-banking financial companies (NBFCs) have demanded income tax benefit on provisioning, like banks. In a representation to the finance ministry recently, the Finance Industry Development Council (FIDC), an umbrella body of NBFCs, demanded that NBFCs be covered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities (Sarfaesi) Act to be able to recover their loans like banks.
The NBFC representatives met Finance Minister P Chidambaram during the pre-Budget meetings.
Sarfaesi Act is a stringent recovery law that allows banks to take over assets of the defaulters and auction them, without any kind of court intervention.
FIDC wants the guidelines implemented over a period of three years, instead of two years as proposed in the draft norms.
The industry body has had several meetings with RBI in this regard.
Among the other demands by NBFCs are maintaining tier-I capital requirement at 7.5 per cent instead of 10 per cent as proposed in RBI’s draft norms.
According to NBFCs, if the tier-I requirement has to be raised, then risk weightage of productive assets such as commercial vehicles and construction equipment should be reduced. They have also requested RBI to allow them to tap external commercial borrowings.
RBI had constituted a working group under former deputy governor Usha Thorat to look into the issues and concern of the NBFC sector. The group had submitted its report to RBI in August 2011. Based on the committee’s report, RBI came out with draft guidelines for the sector in January 2013.
The working group had recommended that NBFCs be given benefit under Sarfaesi Act and given the tax benefits for provision. However, RBI’s draft guidelines did not mention this as it’s the government which will take a decision.
During a meeting organised by industry body FIDC (Finance Industry Development Council), RBI’s Deputy Governor Anand Sinha had indicated that the central bank may take the issue to the finance ministry.
The NBFC representatives met Finance Minister P Chidambaram during the pre-Budget meetings.
Sarfaesi Act is a stringent recovery law that allows banks to take over assets of the defaulters and auction them, without any kind of court intervention.
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In its draft norms for NBFCs released last month, the Reserve Bank of India (RBI) had asked NBFCs to classify loans as non-performing assets if borrowers default for 90 days, instead of the current practice of 180 days.
FIDC wants the guidelines implemented over a period of three years, instead of two years as proposed in the draft norms.
The industry body has had several meetings with RBI in this regard.
Among the other demands by NBFCs are maintaining tier-I capital requirement at 7.5 per cent instead of 10 per cent as proposed in RBI’s draft norms.
According to NBFCs, if the tier-I requirement has to be raised, then risk weightage of productive assets such as commercial vehicles and construction equipment should be reduced. They have also requested RBI to allow them to tap external commercial borrowings.
RBI had constituted a working group under former deputy governor Usha Thorat to look into the issues and concern of the NBFC sector. The group had submitted its report to RBI in August 2011. Based on the committee’s report, RBI came out with draft guidelines for the sector in January 2013.
The working group had recommended that NBFCs be given benefit under Sarfaesi Act and given the tax benefits for provision. However, RBI’s draft guidelines did not mention this as it’s the government which will take a decision.
During a meeting organised by industry body FIDC (Finance Industry Development Council), RBI’s Deputy Governor Anand Sinha had indicated that the central bank may take the issue to the finance ministry.