Rbi Probes Peerless General Investments

The Reserve Bank of India has conducted an inspection into the investment patterns of Peerless General Finance, the country's largest residuary non-banking company (RNBC) with total assets of over Rs 5,520 crore, to look into whether the company has made investments according to the central bank's norms.

This is the first time since the framing of the new regulations for non-banking finance companies that RBI has inspected, on-site, the investments of RNBCs.

A senior RBI official confirmed to Business Standard yesterday that the inspection had been completed, and that the report was in the process of being written. RBI, the official said, would now resort to similar inspections as and when the apex bank found it fit.

 

"The investments issue is particularly important in the case of RNBCs, since that is their life-blood. Hence, we thought it fit to inspect them to check whether the rules are being followed," the RBI source explained.

Under the RBI norms, an RNBC has to invest 80 per cent of their deposits in approved securities, which include specified government securities, state paper, bonds guaranteed by the government and US-64 units, among others.

The RBI official added that another major RNBC where a similar inspection has been conducted on investment patterns is Sahara India, and a separate report on it would be completed. "We want to see first hand whether the investments have been made according to the RBI's requirements," the official said.

The official said there was no immediate reason to believe that the investments were not being made according to the norms.

RBI is also awaiting a detailed revival plan from Peerless to get it back on the black as quickly as possible. "We have asked them to prepare a turnaround plan. Now it is up to them to get back to us after finalising it," the official said.

Peerless, which ran up a net loss of Rs 30.82 crore for 1996-97, is drawing up crucial plans to streamline operations, shed non-core areas, and turn viable once again. While total assets had increased during 1996-97 from Rs 4,808.50 crore to Rs 5,520.45 crore, operating losses declined from Rs 117.94 crore to Rs 78.13 crore.

The Peerless board has also made some changes in its management structure to ensure effective co-ordination, control and accountability. It has set up a management committee of senior executives to ensure the implementation of plans and to achieve the desired objectives. Though there have been rumours of a possible sale of the company, the management of Peerless has stoutly denied any such possibility.