Alfs To Seek Easier Warrants Norm

The Association of Leasing and Financial Services Compa-nies (ALFS) will approach the Reserve Bank of India (RBI) to ask them to take a softer stand on providing the interest warrant facility extended by banks to non-banking finance companies (NBFCs) for the purpose of their repayments of principal, interest, and other repayments.

Mahesh Thakkar, executive director of ALFS will be meeting with the RBI governor, C Rangarajan, deputy governor, S P Talwar, and executive director V Rangarajan in this regard in the coming week. Following the break-out of the CRB scam, the RBI issued a notification to banks asking them to stop extending 'at par' encashment facility for dividend/interest warrants and refund orders in all the branches and allow this system only in select branches where computer processing facilities are available.

 

This facility was a credit facility extended to non-banking finance companies to enable them to make payments of interest and principal as the depositor will be able to encash it faster without paying any commission to the banks.

CRB Capital Markets enjoyed a facility of this nature to make payments of principal and interest to its fixed deposit holders. They managed to siphon off Rs 57 crore through this route. As per this circular the banks will have to ensure that money is already deposited in the account of the company in the bank before the former sends it to deposit holders.

Moreover, this facility will only be extended in select branches.

The ALFS also wants to place before the RBI the issue of various unsubstantiated reports that have appeared in the press maligning leading players in the non-banking finance companies segments.

The ALFS will request the RBI to issue a corrective statement with reference to this. Thirdly, the ALFS will also ask RBI to work towards changing the perception of banks and financial institutions with regards to the NBFC sector, asking them to treat the CRB episode as an exception rather than the rule. NBFCs have been facing a cautious stand from banks following the CRB episode.

Although the leading players are confident that bank finance won't slow down, the small players could bear the brunt of the CRB issue as around 15 per cent of funds to the non-banking finance companies sector comes from fixed deposits.

Total funds from banks is around Rs 13,000 crore, and that of financial institutions is another Rs 3000-5000 crore.