Not By Rating Alone, Say Leasing Firms

The leasing and hire purchase companies demanded that credit rating should not be the only criterion to decide the deposit taking limits of finance companies.

At a meeting with the Reserve Bank of India yesterday, representatives of these companies complained that the approach of rating agencies is theoretical, as they go just by the balance sheet of finance companies. They do not understand the intricacies of the business, the chief executive of a company said. The RBI must evolve alternative criteria, they insisted. Otherwise, the central bank should take over the rating function, they added.

The apex bank was represented at the meeting by its deputy governor S P Talwar, and Y H Malegam and P R Khanna, its advisers. The lease and purchase companies were represented by the senior executives of Tata Finance, 20th Century, Ceat Financial, Lloyds Finance, Sunderam Finance, Wall Street Finance and General Motor Finance, among others.

 

The RBI assured the industry representatives that genuine difficulties will be duly considered.

The industry representatives also said the rating could suffer from vested interests, as these agencies had been promoted by financial institutions.

They also demanded that the unrated companies should be allowed to raise public deposits. The major contention of these companies was that the measures announced by the RBI on January 2 had made it difficult for them to meet the gearing ratio.

The 1998-end time limit for them to reduce the public deposit figure to the limits described by the RBI was arbitrary, and should be extended to three years, they said. Within this time limit, the finance companies should also be allowed to accept fresh and renewed deposits so long as it did not go above the ceiling. The central bank in turn assured them to consider these demands and if found necessary to relax some of the conditions announced in early January.