Put Thorat panel norms on hold: NBFCs to tell RBI

Vehicle financing one of the major business NBFCs undertake

Non-banking financial companies (NBFCs) would urge the Reserve Bank of India (RBI) not to implement the draft guidelines based on the Usha Thorat committee’s report till loan growth revives and regulatory changes on loan recovery are announced.

Market players say falling automobile sales have hit growth in their vehicle finance portfolios. The Society of Indian Automobile Manufacturers (Siam) had lowered the growth forecast of 2012-13 to 0-1 per cent.

Though Siam is scheduled to release the industry’s sales data in a few days, individual companies have already announced their sales numbers. Most companies showed lower growth compared to last year.

Vehicle financing is one of the major businesses of NBFCs.

Most NBFCs showed flat growth due to the slowdown in the automobile sector. Growth in NBFCs’ commercial vehicle and construction equipment businesses have also declined.

In their representation to RBI before Budget 2013-14, NBFCs had requested the asset classification norm be kept at 180 days and the tier-I capital requirement of 7.5 per cent be continued.

In its draft guidelines based on the Thorat committee report, RBI had brought NBFCs on a par with banks, in terms of the 90-day asset classification norm. It had also raised the tier-I capital requirement for NBFCs from 7.5 per cent to 10 per cent.

In their representation, NBFCs had said if these norms were to be implemented, they should be granted tax benefits on provisioning books, as was the case with banks, and be allowed to recover dues through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002.

These requests were also conveyed to the finance ministry.