New norms for NBFC NPAs opposed

Industry body Assocham has opposed the government’s classification of non-performing assets (NPAs) belonging to non-banking financial companies (NBFCs) which provides for secured and unsecured advances if the overdue period exceeds 90 days.

Under the existing norms, an unsecured asset overdue beyond 90 days and a secured asset overdue beyond 180 days are treated as NPAs.

“NBFCs are a major source of funding for unorganised sector of the economy. The revised classification will eventually increase capital requirements of NBFCs and their cost of lending,” said the Associated Chambers of Commerce and Industry of India (Assocham) in response to draft recommendations of the Reserve Bank of India (RBI) Working Group.

It also suggested an enhanced time frame of five years due to difficult and uncertain economic conditions for tier one capital for capital to risk weighted assets ratio (CRAR) at 12 per cent - instead of within three years as proposed by the group.