The Hindu Business Line : NDDB, 5 others declared PFIs; UTI-1 left out

The specified undertaking of the Unit Trust of India (UTI), UTI-1, which was also being considered, has been left out due to uncertainty over whether it can be a PFI or not.

Official sources said, "The Department of Economic Affairs (DEA) may be asked to make formal request to declare UTI-1 a PFI. The DEA had referred the matter to Law Ministry seeking clarification. The Ministry in turn had referred the issue to the Department of Company Affairs (DCA) which has powers under Section 4A(2) of Companies Act to notify an institution as a PFI."

Based on the recommendation of the administrative Ministry of the applicant company concerned and the banking division of the Finance Ministry, the DCA has notified the others as PFIs, a Finance Ministry official said.

The other applicants, besides NDDB, are Pradeshiya Industrial and Investment Corporation of UP Ltd, Rajasthan State Industrial Development and Investment Corporation Ltd, State Industrial Development Corporation of Maharashtra Ltd, West Bengal Industrial Development Corporation Ltd, and Tamil Nadu Industrial Development Corporation Ltd.

NDDB had listed the advantages it would have after becoming a PFI.

According to DCA sources, on examining the applications it was found that most of the applicants had stated similar advantages.

The reasons cited by NDDB included the advantages of no tax on the accrued interest of the non-performing assets and recourse to the debt recovery tribunal (DRT) for recovery of dues.

To borrowers, payment of interest to PFI is allowed as expenditure only on actual payment, whereas borrowers of non-PFIs can default and yet claim interest expenditure for computation of their income, the applicants had said.

Commenting on the issue of NDDB's constitution and how it met with the requirements of a PFI, the applicant company had said that its activities involve funding agriculture and livestock.

Some of the other advantages of being declared a PFI include the fact that borrowers need not deduct tax at source from the interest they pay, thereby saving financial institutions from maintaining record and reconciling their tax liabilities.

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