Right Agency

This refers to S S Tarapores article NBFCs: Picking up the pieces (June 13). On insurance of small deposits of NBFCs for which there have been strident demands, he has stressed that the Deposit Insurance & Credit Guarantee Corporation (DICGC), a subsidiary of RBI, should not be entrusted with the job, without explaining why. We strongly feel and have argued before the study group on the department of financial companies, chaired by K S Shere, ex-legal adviser of RBI, that DICGC is the most appropriate agency in this regard, because it has the necessary expertise and infrastructure. The new job being similar to insurance of small deposits of the banking sector, which the DICGC has been looking after for more than a decade, can be taken care of by it.

 

We do not know if Tarapores objection flows from his desire to spare the RBI subsidiary from a voluminous job or provide RBI with sufficient leeway to pass the banks if anything goes wrong. As ex-Deputy Governor of RBI, his concern is, of course, understandable, but we want to emphasise that DICGC can discharge its responsibilities creditably, provided the top management of RBI are willing and extend necessary assistance, which, unfortunately, the corporation is being denied for long.

Tarapore has rightly pointed out the absence of proper legal framework and lack of adequate power for RBI to control and monitor the NBFCs. The dichotomy in authority regarding NBFCs, viz the DCA and RBI and the perfunctory functions of DCA in giving registration en masse to such companies have obviously taken its toll. The reported registration of more than a hundred companies of CRB Group just in a day is eloquent testimony to this. The new NBFC legislation which gives RBI more powers is a welcome step in this context. Now all companies having net owned fund (NOF) of Rs 25 lakh or more have to be compulsorily registered to RBI. As per our estimate such companies may be around 12,000 which will come under stricter RBI supervision. But is RBI ready for the job?