NBFCs want parity with banks
27 September 2004
Chennai: The Finance Industry Development Council (FIDC), the recently-formed self-regulating body of non-banking finance companies(NBFC) registered with the RBI, has reiterated its request for parity with banks when it comes to regulatory provisions.
There are currently 613 NBFCs registered with the RBI, of which about 350 have become the council's members. Their demands include making the SARFAESI Act (which allows banks to seize pledged assets for defaulting loans) applicable to them and access to Debt Recovery Tribunals, allowing NBFCs to raise money from abroad through ECB-route, treating provisions for non-performing assets as expenditure for income tax purposes and enhancing capacity to raise public deposits by unrated NBFCs to four times their net-owned funds from 1.5 per cent now.
At a press conference here, office bearers of the council said that the RBI was sympathetic to their cause, but their difficulty was in convincing the finance ministry about their indispensable role in the economy.
Mahesh Thakkar, director general of FIDC, noted that NBFCs had a special role in credit delivery, which cannot be copied or replicated by banks.
Already, development financial institutions have disappeared. If NBFCs also were to vanish, then banks would be the only financial intermediaries. This would not be beneficial for the economy, said the FIDC officials.
They said that the days of bad NBFCs were long gone, with the shakeout that happened in the last four years. Today, the number of NBFCs has shrunk to less than 700, from over 40,000 before the companies were mandated to get a registration certificate from the RBI.
They said the formation of the self-regulatory organisation (FIDC) was a "historic step". The council would not only represent a unified voice of the industry, but would also help weed out charlatans, by showing them up to the regulator.