Elai-Penned Code For Statutory Compliance

The draft code of conduct for the self regulatory organisation (SRO) to regulate small non-banking finance companies (NBFCs) submitted by Equipment Leasing Association of India (Elai) seeks to ensure that members abide by their contractual obligations and various rules and regulations of both the Reserve Bank of India and the SRO.

The draft has been submitted recently to the Reserve Bank of India.

Highlighting the rift between the Elai and the Federation of Indian Hire Purchase Associations (FIHPA) on the one hand, and the Association of Leasing and Financial Services (ALFS) on the other, the draft submitted by Elai speaks only of two regional chapters for the proposed SRO in New Delhi and Calcutta, with headquarters in Chennai. ALFS, which represents NBFC interests in the western part of the country, has been completely left out of the scheme.

ELAI and FIHPA are asking for one apex SRO with regional chapters to keep track of members in their respective regions.

ALFS, however, has been pitching for an independent SROs in each region with functional autonomy and reporting directly to the RBI. According to NBFC sources in the city, ALFS has been left out as they are following an agenda of their own.

ELAI and FIHPA, on the other hand, have decided to forge a common approach for constituting the SRO. With Chennai being the nerve centre for NBFC activities in the country, industry leaders here were assigned the responsibility for making out the draft, said ELAI sources.

Accordingly, it has been suggested that there be three representatives each from the two associations, one chartered accountant, one legal practitioner and two retired officials from either the banking industry or the RBI.

Again, there is no mention of ALFS representatives although ELAI sources maintain that the former will automatically come on board with equal representation as the other two industry associations if the RBI and the task force set up to look into the matter decides on a single, apex SRO with regional chapters.

The overall objective of the SRO is to lensure discipline and healthy growth of the finance companies,lensure that companies function as a part of the financial system within the policy framework so that their existence and functioning does not lead to systemic aberrations; lmprovide greater protection to depositor interest; and leffectively discharge the duties of an SRO.