Nbfcs Ask For Exemption From Rehab Fund Levy

The Association of Leasing & Financial Services Companies has requested the Department of Company Affairs (DCA) to exempt non-banking finance companies (NBFCs) registered with the Reserve Bank of India from contributing to the proposed special fund to be set up by the Centre for rehabilitation/ revival/ protection of assets of a sick industrial company.

The proposed Section 441-A, to be inserted through the Companies (Amendment) Bill, 2001, calls for a contribution of 0.005 per cent to 0.10 per cent of the turnover of every company to the specialised fund.

The Association has reasoned that NBFCs were the victims of industrial sickness and several of them had to pull down shutters because of non-payment of dues by such sick units.

 

"As we (NBFCs) are directly impacted by industrial sickness in the form of huge non-performing assets, it would debilitate us if we were called to make financial contribution to address the issue of industrial sickness," it said in a letter to the DCA.

"Effectively, we would be financially hurt twice -- the first time when our dues are unpaid and a second time when out of our turnover we have to contribute a percentage for the benefit of such defaulting companies," the Association said.

It cautioned that, in the backdrop of several NBFCs not being in a position to repay public deposits, if they are called upon to make a further cash outflow by means of this turnover tax then the interest of thousands of depositors could also be affected.

AL&FS has averred that the NBFCs did not enjoy a "level playing field" with the rest of the financial system. "We do not get tax breaks on the provisioning completed as per the RBI stipulation, whereas other credit guarantors -- be they a bank or a financial system -- do get tax breaks on provisioning completed by them," it argued.

NBFCs are further frustrated in their effort to control the NPA menace because they are not entitled to use the services of DRTs.