Mumbai, April 27: The Reserve Bank of India (RBI) on Monday announced the formation of an informal advisory group on non-banking financial companies (NBFCs) to review the implementation of the new NBFC regulations issued on January 2, 1998.S Gurumurthy, executive director of the Reserve Bank of India, will be the chairman of the advisory group and VSN Murthy, chief general manager of the department of non-banking supervision of the RBI, will be the convenor.
Other members of the group include GK Raman, managing director of Sundaram Finance Ltd, and DS Pendse, managing director of Tata Finance Ltd. The advisory group will also take one representative each from the Institute of Chartered Accountants of India, Association of Leasing and Financial Services Companies, Equipment Leasing Association and the Federation of Indian Hire Purchase Association.
The Association of Leasing and Financial Services Companies is likely to be represented by either Mahesh Thakker, executive director of ALFS, or AC Shah,former chief of Bank of Baroda. Representatives from some of the state-level associations of equipment leasing and hire purchase companies will be appointed as members of the group by rotation. The group, which will have a tenure of one year, will meet at least once every quarter.Specific operational matters relating to regulatory and supervisory concerns will also be referred to the committee for its suggestions. The RBI, on January 2, had announced a set of stringent measures to rein in the NBFC sector. One of the major announcements made by the central bank was the restriction of access to public deposits by NBFCs.
Under the guidelines issued, triple-A rated companies were not allowed to raise more then three times their net-owned funds (NOF) in public deposits. While double-A rated companies were not allowed to raise more than two times their NOF in public deposits, finance companies with single-A ratings were allowed to raise public deposits equal to their NOF.
Following hectic lobbying by the NBFCsector, the RBI relaxed these guidelines on January 31, 1998. According to the revised guidelines, triple-A rated companies are now allowed to raise four times their NOF in public deposits. Double-A rated companies are allowed to raise 2.5 times their NOF in public deposits while single-A rated companies can raise 1.5 times their NOF in public deposits. Even triple-B rated finance companies, which were not allowed to raise deposits under the previous guidelines, are now allowed to raise public deposits equal to half their NOF.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
