Terms Of Reference For Nbfc Deposit Insurance Panel Finalised

The Association of Leasing and Financial Services Companies (ALFS) and the Equipment Leasing Association (ELA) have finalised the terms of reference for the Committee on Deposit Insurance for non-banking finance companies (NBFCs).

The committee will be chaired by A C Shah, former chairman of Bank of Baroda, and will comprise six or seven members from the industry as well as independent experts in this field

While finalising the deposit insurance paper, the committee will examine the following issues

Does the industry want deposit insurance or not;

Will deposit insurance be applicable to all NBFCs or registered NBFCs only. (This issue will cover companies which plan to continue in operation only for a year or two till their deposits mature and which do not wish to reapply for registration);

Who will provide the insurance - will it be the Deposit Insurance Credit Guarantee Corporation, existing public sector insurance companies or whether separate companies will have to be set up;

What should be the amount to be covered under insurance;

Whether or not the premium should be based on the companys rating;

What should be the premium;

Who should bear the premium, the company or the depositor;

Should different companies have different premiums based on their credit rating, or should there be a uniform premium, and

What should be the nature of the risks that will be covered by the insurance;

The A C Shah committee will also study the Shere Committee report, which had made recommendations on deposit insurance.

The panel has been set up in the wake of the CRB fiasco, in which thousands of depositors lost their money kept with the NBFC promoted by CR Bhansali.

The two apex level bodies representing NBFCs plans to present its paper to the RBI before July 15.