Mr T.T.Srinivasaraghavan, Managing Director, Sundaram Finance said that the working group's recommendations, on first reading, seems very positive for the NBFC sector. He said that the recognition of the role played by the NBFC sector in last mile credit delivery is very heartening and is a significant endorsement, by the regulator, of the role played by the NBFCs in the much talked about financial inclusion.

He said,"The tax treatment in respect of Income Tax deduction for provisions made under the regulations is something we have been asking for, for the last 15 years. Second, the benefit that is likely to accrue to NBFCs under the SARFAESI Act is also a positive step for the NBFCs."

He said, "We believe that the message that the regulator is looking to send out through this report is to have a greater convergence between the regulation of Banks and Non-Banks. There seems to be a road map for this convergence and we believe that this will happen over a period of time."

Unaddressed Plea

He however expressed disappointment that one long standing plea of the NBFCs that has not been addressed in this report is their request for differential risk weights for different classes of assets financed by NBFCs. While the risk weights for NBFCs with capital market and Commercial Real Estate exposures have been raised, the report has not touched upon the NBFC sector’s plea for preferential risk weights for the lower risk assets financed by them. He said, "Asset financing NBFCs have consistently demonstrated their ability to manage retail portfolios with low levels of credit losses and it is only fair that this be duly recognised by RBI. We will continue our plea with the regulator to consider assigning differential risk weights for different classes of assets, based on their risk categorisation."

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