RBI has also allowed leasing and hire-purchase companies with minimum investment grade credit ratings to accept public deposits up to four times their NOF, provided they have CARs of 10 per cent as on March 31, 1998 and 12 per cent as on March 31, 1999. Investment-grade companies were earlier allowed to raise only 0.5 times their NOF in public deposits.

Association of Leasing & Financial Services Companies executive director Mahesh Thakkar welcomed the RBIdecision saying that it would boost public confidence in finance companies. "Finance companies will now be able to channelise funds from depositors and large scale defaults can be avoided. The leasing and hire-purchase companies which depended to a great extent on retail depositors will now be able to carry on their business," he said.

Loan and investment companies have been allowed to raise public deposits not exceeding 1.5 times their NOF provided they have a CAR of 15 per cent or more. Investment companies with credit ratings of A and above, holding public deposits, have been directed to attain a minimum CAR of 15 per cent on or before March 31, 2000. RBI intends to increase the CAR for all NBFCs to 15 per cent over a period of time.

Unrated companies and companies with below investment-grade ratings will have to disclose, through advertisements, that the company is unrated or that the latest rating of the company is below investment grade. This will enable investors to take an informed decisionbefore putting their money in the deposit programme of any NBFC.

Apart from scheduled commercial banks, NBFCs have also been permitted to keep their liquid securities with the Stock Holding Corporation of India Ltd. This facility is expected to provide operational convenience to NBFCs.

NBFCs have been advised not to invest more than 10 per cent of their owned funds in land and building. The ceiling on investments in unquoted shares of companies other than group and subsidiary companies has been fixed at 10 per cent of owned funds for leasing and hire-purchase companies and 20 per cent for investment companies. NBFCs have been given a three-year time period to dispose off the excess of such assets, in case they have exceeded the ceiling.

RBI has also relaxed the deposit taking powers of unincorporated bodies engaged in the business of non-banking financial institutions which were earlier not allowed to accept public deposits except from relatives. These entities would now be allowed to access loansfrom corporate bodies including NBFCs.