Mumbai, Mar 12: Leading non-banking finance companies (NBFCs) are tying up with regional banks and even cooperative banks for `at-par' facility following the reluctance of the State Bank of India (SBI) to provide the service at more than 100 designated centers. NBFCs depend on the `at-par' facility for servicing interest warrants issued to investors against fixed deposits with them.Many NBFCs like Birla Global Finance and Lloyds Finance have tied up with a string of smaller banks with different regional presence to service their investors. They have tied up with other banks for the warrant encashment facility, while maintaining their existing facility with the State Bank alongside. The tie-ups with the other banks are for areas and towns where the SBI branches do not service the `at-par' facility.
Corporation Bank, Bank of Madura, Union Bank of India, Karur Vysya Bank and State Bank of Travancore are some of the banks that are aggressively trying to market their warrant encashment facility to the NBFCs. Earlier, nearly all NBFCs depended on the SBI's `at-par' facility for servicing interest warrant against fixed deposits due to its reach and easy availability of the facility.
Having burnt its finger in the CRB fiasco, the SBI has decided to offer the facility very selectively and with stringent conditions. It has told many NBFCs having `at-par' facility with it that the facility will be closed after March 31.
Some top rated NBFCs -- mostly the ones which have SBI as its consortium banker -- continue to enjoy `at-par' facility with the bank. The SBI has insisted on many stringent conditions like limiting the number of service branches to 100 starting April 1. SBI has also informed these NBFCs that they will have to renew their facility at the end of each year. Earlier, `at-par' facility, once opened, was allowed to run for the entire course of the fixed deposit scheme.
While Birla Global, Kotak Mahindra and Lloyds Finance are some of the few lucky NBFCs to have been allowed by the SBI to renew their `at-par' facility with it, most others will have to go for the regional banks.
According to NBFC officials, smaller banks are eagerly stepping into the business space left vacant by the SBI's decision to restrict the facility to a very select clientele. The advantage for the smaller banks are that they get a hefty fee of Rs 3 per warrant encashment, while at the same time roll over the cash paid into the `at-par' account in the shorter term. The service does not involve cash out-go for the banks as the NBFCs are expected to keep the cash against warrants upfront with the banks.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
