Nbfcs Want Bank Finance Cap Out

Removal of restrictions on bank finance and interest rate deregulation on deposits will be the main issues raised by the non-banking finance companies (NBFCs) in their pre-credit policy representation to the Reserve Bank of India (RBI).

The apex bank currently limits the amount of bank finance that can be availed by the NBFCs to two or three times the hire purchase and lease portfolios of the latter, depending on the percentage of assets held in them.

According to Mahesh Thakkar, executive director of the Association of Leasing and Financial Services Companies (AL&FS), putting a cap on bank finance, which is a crucial source of funds for NBFCs, is not warranted.

 

We will ask the RBI to withdraw this restriction and instead instruct banks to decide on how much they can disburse to NBFCs, on a case-to-case basis, he added.

Subsequent to the clampdown on NBFCs by the Reserve Bank of India on January 16, public deposits as an avenue of funds has dried up and borrowing from other sources is also not viable given the present market conditions.

Freeing deposit rates, which is now capped at 16 per cent, is another issue that would be taken up by the association, said Thakkar.

AL&FS is also planning to meet the RBI next week to seek a review on the issue of mandatory credit rating for non-banking finance companies.

We are planning to request the RBI that small and medium companies with net-owned funds of, say, around Rs 2 crore will not have to compulsorily get a rating, he said.

The association will also discuss transparency in credit rating and phasing out of other restrictions.