Rbi Shelves Decision On Crb Caps Deposit Certification

The company had asked for a rating for Rs 200-crore as compared with the earlier Rs 175-crore worth of fixed deposits from Credit Analysis and Research (CARE).

CARE has downgraded the ongoing FD programme from A+ to A. Sources at RBI said the central bank was keeping a close tab on the downgradation of the fixed deposit rating programme of the

company.

We will take a close look at the downgradation before granting the certificate for relaxation of limits an RBI source said.

The central bank is also monitoring the granting of incentives by particular companies, CRB included, in excess of the stipulated 15 per cent, before granting them certificates.

 

Companies are continuing to offer incentives in excess of the statutory brokerage in order to garner funds for their fixed deposit programme.

RBI has stipulated a statutory brokerage amount of 1 per cent on one year deposits, 1.5 per cent for two years and 3 per cent for three year deposits. However, companies continue to offer cash incentives to depositors through brokers in excess of the statutory amounts.

The central bank has recently written to 15-20 companies telling them to stop paying brokerage in excess of stipulated amounts.

CRB has reported to be lending very heavily in the inter-corporate deposits market during the current financial year.

In fiscal 1996, interest on inter-corporate deposits contributed the largest component (38.5 per cent) of the total income. The total income of CRB at Rs 132.9 crore registered a growth of 42 per cent, over fiscal 1995.

CARE has stated that the change in CRBs rating reflects the liquidity problems faced by the company during the past few months, leading to delays in meeting some payment obligations on inter-corporate deposits and a deterioration in its recovery performance.

An official release from CARE stated that CRBs recovery of lease and hire purchase receivables deteriorated substantially, with overdues as on March 31, 1996 reaching 26.7 per cent of the total demands raised during the year.

Company officials said the company has applied to the central bank for granting a certificate regarding relaxation of the 15 per cent ceiling on fixed deposit rates, removal of deposit raising amount limits and reduction in statutory liquidity ratio

requirements. A senior official said the company is still above the minimum grade requirement and getting the Reserve Bank of India approval should not be a problem. He said that CAREs minimum grade rating is BBB whereas the company was still one rung above it at A.