While non-banking finance companies which have collected a smaller amount of a few hundred crore from the public have taken rating from a credit rating agency, the regulators have not made rating mandatory for RNBCs.

As per the prevailing RBI guidelines, an RNBC has to invest at least 80 per cent of its aggregate deposits in securities such as government securities and government guaranteed bonds (minimum 10 per cent), fixed deposits and certificate of deposit of scheduled commercial banks or public financialinstitutions (minimum 10 per cent), and other specified securities having a credit rating of `AA+' or above (maximum 60 per cent).

``The remaining 20 per cent of the funds only may be invested as per the discretion of the company subject to the condition that it does not exceed five times the net owned fund of the company,'' said SIFCL investments controller Pallav Agarwal, adding that in light of more than 80 per cent directed investment, the apex bank has not made it mandatory for an RNBC to seek credit rating nor has it linked the deposit mobilisation to any criteria like the net-owned funds (NoF).

The deposit figure which was Rs 2182.01 crore as on March 31, 1997 reached the level of Rs 3,057.22 crore as on March 31, 1998 and Rs 3,475 crore as on March 31, 1999. The company - which has an equity capital of only Rs 46.51 crore - now says that by the year 2001 this figure will reach the level of Rs 5,000 crore!

On the other hand, none of the existing finance companies or manufacturing are yet to comeanywhere near the deposit level of Sahara. Strangely, the regulator RBI has not put any ceiling on RNBC's deposit mobilisation levels. "SIFCL's investment portfolio has crossed Rs 3000 crore as of March 31, 1999," Agarwal said, claiming that RBI has laid out stringent investment norms governing an RNBC's investments but has not prescribed any ceiling on the amount of deposit mobilised by it.

Following the collapse of CRB Capital Markets, the RBI had tightened the guidelines for NBFCs. Even after tightening the norms, several NBFCs had collapsed, leaving thousands of investors high and dry.

Agarwal claimed that due to conservative and prudent policies, the non-performing assets of the company as on March 31, 1999 were less than one per cent of the total risk-weighted assets of the company. The official admitted that the company had burnt its fingers in the UTI's US-64 investment where they had invested a permitted 10 per cent.