MUMBAI, January 9: Following protests from non-banking finance companies (NBFCs), the Reserve Bank of India on Friday relaxed the timeframe for compliance of new deposit taking norms by allowing NBFCs to hold on to excess deposits beyond the stipulated deadline of December 31, 1998."It may be clarified that RBI does not intend to order the NBFCs to prematurely repay their deposits. The NBFCs pay their deposits only on maturity," an RBI release said on Friday.
For instance, "if deposits accepted before January 2, 1998, are maturing after December 31, 1998, and the concerned NBFC holds these deposits in excess of its entitlements, this would not tantamount to violation of the RBI directions," it clarified.
This is expected to reduce the asset-liability mismatches that the NBFC industry will face following the new guidelines announced on January 2. The Reserve Bank also said that if any company faces "genuine difficulty in adhering to the timeframe", it is committed to give more time for compliance of
these regulations.
The deposit-taking ability of the NBFCs - linked to their net-owned funds - will be determined by the credit rating agencies. Any NBFC, with a rating of less than `A' will not be entitled to raise public deposit.
In case one NBFC obtains two different ratings from credit rating agencies, it is free to use the rating "beneficial" to it, the Reserve Bank clarified. However, if there is a "big divergence" between the two ratings, RBI will take up the matter with both the credit rating agencies to review and rationalise their opinion about the company's rating.
RBI has also said that companies whose bonafide intention is to carry on predominantly as a leasing and hire purchase company are not expected to face much difficulty in achieving the new norms where 60 per cent of its total assets and income will have to be from leasing and hire-purchase activities. "NBFCs have been allowed sufficient time to achieve the ratio of 60 per cent," said the release.
Defending its "silence" on the
residuary non-banking finance companies (RNBCs), the Reserve Bank release said the deposit acceptance activities of these companies are entirely different from those of NBFCs in terms of method of mobilisation of deposits and also deployment of depositors funds.
"RNBCs have to invest not less than 80 per cent of their aggregate deposits in the prescribed investment pattern. Only 20 per cent of their deposits or 10 times NOF, whichever is lower, can be deployed in other assets," it said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
