Coimbatore, July 25
MEMBERS of the South India Hire Purchase Association (SIHPA) have said that as an industry, these non-banking finance companies (engaged in hire purchase business) were being subject to the rigours of the banking system, but denied the pleasures applied to the banking sector.
Demanding a level playing field with the nationalised banks to sustain in business in a competitive environment, the SIHPA Chairman Mr Ramesh Nahar, emphasised the need for asset protection. "We do not have a forum like the Debt Recovery Tribunal or an asset recovery mechanism. Though the industry's NPA is minimal, how do we bring the wilful defaulters to books when there is no asset recovery mechanism?" he asked.
Mr Nahar said that the sector was subject to all kinds of taxes such as service tax, sales tax, fringe benefit tax, and cash withdrawal tax despite playing a major role as a service industry. "Banks are not subject to such taxes. While we are a service provider, we are subject to tax as a trader on one hand and as a service industry on the other," he said.
To add to the woes of this sector, the hire purchase financiers, despite being in organised financial transaction, have been brought under the Usury Act. Stating that their margins were squeezed already with the banks entering the business of retail finances in a big way, he said it was for the regulator - RBI - to ensure that the rate of indirect lending be less than direct lending.
The association has appealed to the RBI for a well-defined funding system and tax benefit on provisions and contingencies (as applicable to the banking industry) for the hire purchase financiers.