NEW DELHI, June 18: Less than a month after the CRB scam broke cover, non-banking finance companies (NBFCs) are finding that their whole world has changed. Gone is the easy access to fixed deposits that they were used to. Gone too is the earlier certainty that if you offer a higher interest rate, people will invest. On the contrary, depositor preference has suddenly started shifting towards more solid looking manufacturing companies.

Industry sources admit that there has been a drop of over 20 % in fresh deposits raised over the previous year, and this has been mainly on account of the CRB scam. The industry is, therefore, reworking its strategy to cope with the changing times. Since high rates are equated with high risks, many of the top NBFCs have started offering lower rates of interest on fixed deposits (FDs) to boost investor confidence.

These are the main findings of a Financial Express survey of the investor's mood after CRB. The following is a summary of what's happening in various states.

Mumbai: With the initial fear psychosis gradually ebbing, most NBFCs are realising that the public has rightly begun to equate high rates with high risk. Most of the legitimate ones are, therefore, trying to lower rates to convey this message.

Tata Finance and Mafatlal Finance have slashed their rates to 14 % and 13 % respectively on three-year deposits. Other NBFCs like 20th Century Finance, Sundaram Finance, Kotak Mahindra Finance, Escorts Finance and Lloyds Finance have also resorted to cuts ranging between 50-100 basis points.

Despite this, there have been very few takers for the FD programmes of NBFCs. Depositors, for want of safety, have also begun parking their funds in banks though the returns offered are much lower.

Delhi: There was a temporary blip in deposit collections soon after CRB broke out. Investments in NBFC deposits have resumed, though pre-CRB levels of mobilisation are yet to be reached. Investors still see NBFCs are the best avenue for parking black wealth.

Calcutta: The initial withdrawal panic over, NBFCs are still counting the costs, but some guesstimates put the total drain through withdrawals by panicky investors at around Rs 50 crore. ITC Classic and Prudential Caps have thus far successfully weathered the run of their deposits but still face mild pressure.

Chennai: Since August 1996, 31 finance companies have been closed down. Sneeham Finance was the first to go last August while Imperial Finance closed this April. Some NBFC problems are linked to former Jayalalitha confidantes and ministers. But the city is set to recover since Chennai is the home of the NBFCs.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.