Times Guarantee seeks Reserve Bank clearance to return fixed deposits
George Cherian
MUMBAI, January 13: Times Guaranty Financials (TGFL) has sought the Reserve Bank of India's permission to return funds to fixed deposit holders.TGFL is the first non-banking finance company to initiate the move to return depositors' monies after the Reserve Bank of India issued new regulatory norms for NBFCs on January 2, 1998. The Reserve Bank had directed the finance companies to regularise their depoists by December 31. TGFL which has an outstanding fixed deposits to the tune of Rs 14 crore wrote to the central bank on January 3 seeking its green signal to clear the public deposits, soon after the new guidelines were announced. "We are awaiting the Reserve Bank's reply," said a source at TGFL. "Depositors will be paid in full and there will be no reduction in the rate of interest," said the source. Though RBI relaxed the NBFC guidelines on January 9 and allowed NBFCs to retain their excess deposits until the date of maturity, TGFL has decided to return all public deposits immediately. "The idea is
essentially to get out of the lending business," the source added. For the year ended March 31, 1997, TGFL posted a huge net loss of Rs 43.42 crore which was chiefly on account of the company having to provide for Rs 48.64 crore towards provision for doubtful debts. TGFL has got out of all fund-based business and is concentrating on fee-based business. The shift has paid off with the company posting a net profit of Rs 2.19 crore during the first half of the current year. TGFL has informed shareholders that the shift to fee-based activities will have a long gestation period, given the state of the financial markets. The company still has Rs 48 crore of accumulated losses. The company is now in the process of establishing itself as an investment bank and proposes to offer services ranging from risk assessment, corporate restructuring, advise on mergers, acquisitions and privatisation, advise on corporate treasury management and investment strategy, advise on working capital management and advise on project
finance. An increasing number of middle-rung NBFCs are shifting focus from fund-based to fee-based activities after facing huge defaults in the hire-purchase and leasing business. With the economy going through a downturn, most corporates have been defaulting on their lease rentals to finance companies. On the auto finance front, though the quality of auto loans continues to be good, lower resale value of premium cars compared with economy models, has increased the inherent risk in this segment.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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