Reserve bank of India (RBI) officials on Thursday met representatives from non-banking finance companies (NBFCs) and associations of cooperative banks and discussed the current environment prevailing in the industry.
In the customary pre-credit policy meeting, representatives from Finance Industry Development Council (FIDC), an association of NBFCs, met RBI Deputy Governor Subir Gokarn and raised concerns on recent steps taken by the central bank.
Also present at the meeting were representatives from National Federation of Urban Cooperative Banks and Credit Societies, the National Federation of State Cooperative Banks, the Maharashtra Urban Cooperative Banks Federation and the Microfinance Institutions Network.
A major concern taken up in the meeting was RBI's decision to increase the minimum capital adequacy ratio (CRAR) for deposit-taking NBFCs from 12 per cent to 15 per cent, thereby aligning them with non deposit-taking NBFCs. “The decision by the regulator to increase the CRAR was unwarranted. There are a lot of other requirements which the deposit-taking NBFCs have to comply with, like maintaining 15 per cent SLR. This is not required by non deposit-taking NBFCs. So, this decision was totally unnecessary,” said FIDC Director General, Mahesh Thakkar.
NBFCs also demanded that a differential risk weightage system should be introduced for NBFCs to replace the current uniform risk weightage system. “We demanded that risk weightage to commercial auto loans be brought down from 100 basis points to 50 basis points. If this happens, only then can the NBFC sector absorb the impact of the hike in CRAR,” Thakkar said. Currently, all NBFCs have to provide a risk weightage of 100 basis points against all types of advances.
The NBFCs also expressed concerns on the current liquidity and inflationary situation. “Though there are signs of liquidity easing, interest rates have to come down, as they are already eating into the margins of companies,” said an NBFC official.
“We have demanded the deregulation of the interest regime in the forthcoming annual monetary policy, since in the current interest rate scenario, we would continue to bleed. Thursday, we are forced to lend at 7 per cent to the farm sector. But we pay 9 per cent to the banks. This situation just cannot continue,” National Federation of State Cooperative Banks Managing Director, B Subramanyam, said after the meeting. “Earlier state cooperatives were getting 2 per cent interest rate subvention to tide over the borrowing and lending rate mismatch. But last year, RBI had brought it down to 1.5 per cent,” Subramanyam added.