The Hindu Business Line : Draft code of conduct for NBFCs ready

A DRAFT code of conduct has now been adopted by the Managing Committee of the Finance Industry Development Council, the newly formed self-regulatory organisation of non banking financial companies (NBFCs) at its recent meeting in Chennai. It is being circulated to all the members for their comments and suggestions. FIDC has come about at the instance of the RBI which has long been advising the sector to become "self-regulated".

The Code, it is pointed out, will broadly cover areas such asbusiness practices, accounting policies, relationship with depositors/investors/customers and also regulators, legal matters and disciplinary proceedings against members.

Talking to Business Line today from his Mumbai office, Mr Mahesh Thakkar, Director General of FIDC, said comments and suggestions are being invited up to December 31, 2004, after which a final code of conduct would be ready.

The Code, he said, would be binding on all members of FIDC, registered with the Reserve Bank of India, either under `A' or `B' category from such date as the Managing Committee of FIDC may decide as the effective date for the Code to come into effect. Category `A' constitutes NBFCs authorised by RBI to accept public deposits, and now number 613, according to Mr Thakkar.

He said some nearly 50 per cent of these NBFCs across the country have now opted for the FIDC membership. It is learnt that the `A' category NBFCs would be brought into the ambit of FIDC in the first phase, hopefully by March 2005.

Regional Chapters are also being created to attend to the local issues relating to NBFCs.

On the draft Code, he said the purpose was to protect interests of members, promote asset finance business, ensure fair and ethical practices among members and to bring NBFCs into the mainstream of the financial sector .

Mr Thakkar said the FIDC will set up a Disciplinary Committee (Standing Committee) to deal with any violation or default of the Code by any member.

Members, he said, are also expected to maintain high standards of integrity in all their dealings, and disclose and inform all the relevant rights and privileges vis-a-vis the company and also their duties and obligations in respect of specific transactions.