MUMBAI, January 28: The Reserve Bank of India (RBI) might relax some of the norms under the new regulatory framework for equipment-leasing and hire-purchase firms if they face "genuine difficulties". The central bank indicated this at a meeting with representatives of various hire-purchase and leasing companies held on Tuesday.The meeting, chaired by RBI deputy governor SP Talwar, was called to take stock of the situation after the new norms were announced on January 2. Senior officials of Twentieth Century Finance, Ceat Financial, Sundaram Finance, Lloyds Finance, Tata Finance, Tata Sons, Motor General and Wall Street Finance were present along with a Confederation of Indian Industry (CII) representative.
"They expressed their difficulties and we heard them out," an RBI official said. The companies wanted the Reserve Bank to relax the time-frame for adjusting themselves to the new norms.
Instead of making the new norms applicable from December 1998, the companies wanted them to be applicable in threeyears.
"This apart, the firms expressed their difficulties in facing gearing ratios. They wanted some relaxation with various gearing ratios," the official said.
The RBI told the firms they should not accept public deposits to fund their businesses.
"We have told them that they should access other sources like debentures and bonds, instead of depending on public deposits," the source said.
Sources in the apex bank said the RBI had not given any assurance to these firms. But their genuine difficulties would be dealt within the regulatory framework, they added.
"Some relaxations within the framework can be done in case of genuine difficulties," a source close to the central bank said. The relaxation is likely to be done on an individual basis, sources indicated.
In a scathing attack on rating agencies, the companies said they would rather prefer to be rated by the RBI. According to sources, officials from the leasing companies said rating agencies did not have the correct analysts to rate them. Theyfeel the agencies' officials often do not understand the hire-purchase and leasing business and base their ratings only from the balance-sheet. The companies do not get the opportunity to explain the nature of their businesses to these analysts. "The Reserve Bank took note of this point," the official added.
The firms were also sharply divided over the new non-performing asset (NPA) norms in the new package. While one group said 12 months was too long a time and six months was appropriate, another felt the time-frame was fine. The firms also felt NPA should not be classified on the basis of borrowers.
"We know the borrowers personally and they might be facing problems, which is why they cannot pay some of their instalments on time. We should not classify them as an NPA", the official said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
