Peerless Revamps Commission With Eye On Viability

Residuary non-banking finance company (RNBC) Peerless General Finance & Investment is redesigning the commission structure within the permissible limit as part of a strategy to reduce administrative expenses and make itself "viable".

S K Roy, managing director, has urged employees to improve collections for self sustainability. In a communiqu, to employees, Roy said Peerless is passing through a difficult period and this calls for "all round improvement in approach towards business development".

The company is strictly going by the advice of the regulatory authority which stipulates that the cost of funds should remain within its income and at no point should the fund be eroded. Peerless has calculated that its cost of funds on renewal should not be more than 3 per cent on average. Last year, the Reserve Bank of India had lowered the floor interest rate on funds raised by RNBCs to 8 per cent from 10 per cent. The guideline, which applies to monthly, quarterly, half yearly and annual schemes, has given RNBCs an opportunity to raise funds from the public at lower rates.

With a deposit base of over Rs 6000 crore, Peerless is saddled with a deferred payment liability of Rs 771 crore.

Meanwhile, following instructions from the apex bank to submit a restructuring report, Peerless has tabled the details of its turnaround plan to the RBI. The Reserve Bank has also conducted an inspection into Peerless' investment patterns. Under RBI norms, RNBCs have to invest 80 per cent of their deposits in approved securities, which include specified government securities, state paper, bonds guaranteed by the government and others.

Having incurred a net loss of Rs 30 crore in 1996-97, Peerless has drawn up a strategy to shed non core operations. For example, the board has decided to disengage itself from all subsidiaries which are not in the financial services sector.

The board is stressing on effective co-ordination, control and accountability.

Peerless is a closely held company with managing director S K Roy holding about 70.57 per cent stake. The other shareholders are Poddar Udyog Ltd, R L Gaggar, T K Ghosh and Bhagwati Developers Pvt Ltd.