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Chennai , Sept. 29

A SELF-REGULATORY body for the non-banking finance companies (NBFCs) is in the offing. At the behest of the Reserve Bank of India, the NBFCs are discussing the modalities of setting up the regulatory body.

Mr T.T. Srinivasa Raghavan, Managing Director, Sundaram Finance Ltd, said that the three main industry associations, FIHPA, ALFS and ELAI, had come together.

"The first meeting of the core group was held in Mumbai two days ago and the early portents are certainly encouraging," He was speaking at a meeting organised here by the Equipment Leasing Association of India (ELAI) and the South India Hire Purchase Association.

"In a fiercely competitive marketplace, there is no room to pursue narrow personal agendas," he said, calling for unity among the NBFCs.

He also noted that the Parliamentary Standing Committee on Finance had submitted in July its report on the Financial Companies Regulation Bill, 2000. The report acknowledges the role of NBFCs in the financial system, he said.

Some of the key recommendations of the committee include: (a) regulation to focus only on deposit taking, incorporated bodies. Non-deposit taking companies, investment companies and SPVs are to be excluded, (b) loans on mutually agreed terms to be exempted from the definition of deposit; (c) DRT and Securitisation Act to be extended to NBFCs; (d) separate refinance institution for NBFCs and (e) Finance Ministry to examine making possible parity with banks and FIs.

Speaking on the occasion, Mr R. Seshasayee, Managing Director, Ashok Leyland Ltd, observed that a process of `fleet consolidation' was under way. As a consequence, fleet owners would start looking at finance as a commodity — there would be no `loyalty issues'. NBFCs should, therefore, be more competitive and should be prepared to compete even with banks, he said.

There would also be a demand for `packaged services'— such as finance coupled with insurance. Also, NBFCs should be prepared to contend with shorter product life cycles, Mr Seshasayee said.

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