Nbfcs Told To Set Up Alm

The Reserve Bank of India (RBI) today directed non-banking finance companies (NBFCs) with either a Rs 100 crore and above asset size or holding at least Rs 20 crore public deposits as on March 31, 2001, to put in place an asset-liability management (ALM) system by the end of this fiscal.

The ALM stipulation for the NBFCs is aimed at effective risk management in their portfolios.

The central bank has simultaneously modified NBFC regulations for commercial papers (CPs). Under the modified regulation, it has decided to exempt the monies received by NBFCs by issue of CP from the purview of public deposits.

The RBI has advised the companies that it would be desirable to constitute an ALM committee under the charge of chief executive officer or any other senior executive with other specialist members for carrying out the ground work for formalising the system in the NBFCs.

The first ALM return comprising of statements on structural liquidity, short-term dynamic liquidity and interest rate sensitivity as on September 30, 2002, should be submitted to the RBI by October 31, 2002, by companies holding public deposits, according to an apex bank statement.

NBFCs have been advised to conduct trial runs during the period ending September 30, 2001, and half year beginning October 1, 2001. Any operational difficulties in the implementation of the system has to be reported for necessary corrections.

In the case of companies not accepting/ holding public deposits, but having assets worth Rs 100 crore and above, separate supervisory arrangements were being contemplated that would be notified in due course of time, it said, and added that chit funds and nidhis have been at present kept out of the purview of these guidelines.

Non-banking companies not currently covered by the guidelines have also been recommended to put in place an ALM system as it is the endeavour of the RBI to extend these guidelines to all NBFCs in due course, the statement said.

NBFCs authorised to accept public deposits will have to furnish quarterly and half-yearly returns on liquid assets, irrespective of whether they actually hold public deposits.

The RBI said it had been noted that some of the NBFCs have repaid their entrie public deposits or placed the necessary amounts in eschrow accounts. These companies are required to file the returns, though they virtually became non-public deposit taking company.

The central bank, however, said these companies could apply for coversion into a public deposit taking company to exempt themselves from filing returns.

The central bank, however, said that to improve the accountability of the management of the company to its shareholders, statutory auditors should provide their observations on the contravention of the RBI Act in the reports submitted by them to the shareholders.