Thanks to a Rs 18-crore provision for standard assets, Cholamandalam Finance Company reported a lower net profit of Rs 6.6 crore for the quarter ended December, compared with Rs 7.5 crore for the corresponding period last year.

It was only recently that the Reserve Bank of India mandated non-banking finance companies to make a provision for standard assets. The banking regulator has required NBFCs to set aside a sum equivalent to 0.25 per cent on all good loans and treat it as expenditure (provision). The effect of it, like all provisions, is to lower the profits by that amount.

So far, most NBFCs have been making provisions only for loans which have been overdue on their payment schedule. Now, NBFCs have been brought into the ambit of provisioning for standard assets.

Banks and housing finance companies were asked to comply with it much earlier.

The buoyancy in demand of commercial vehicles has continued in third quarter as the company saw its disbursement grow by 53 per cent to Rs 1,158 crore.

The total receivable from the personal loans — which has been a problem area for the company in the recent pas t— has come down. The Capital Adequacy Ratio was at 18.76 per cent for Q3 2010-11 compared with 15.61 per cent the same period the previous year.

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