Comments
Reacting to the RBI Working Group’s recommendations for non-banking financial companies, Mr V. Lakshmi Narasimhan, CFO, Magma Fincorp, has said: “The RBI’s guidelines for NBFCs are quite balanced, provided they get implemented.
“I say that because there a couple of recommendations that transcend RBI’s purview. For instance, the guidelines say that asset classification and provisioning norms similar to banks to be brought in phased manner for NBFCs. Suitable income-tax deduction akin to banks may be allowed for provisions made under the regulations. As of now tax benefit is available for NBFCs only for write-offs, while banks get tax benefit for provisions. But how can the RBI change tax provisions?
“Similarly, the guidelines say NBFCs may be given the benefit under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. While that is a good thing, I don’t know if it falls within RBI’s purview.
The guideline says that the Tier-I capital for Capital to Risk Weighted Assets Ratio (CRAR) purposes may be specified at 12 per cent to be achieved in three years for all registered deposit taking and non-deposit taking NBFCs. But with banks sitting on 4.5 per cent Tier I, this does not remove the arbitrage between banks and NBFCs. This is a regressive step for NBFCs.
The RBI has also has not looked at issues such as priority sector lending and external commercial borrowings, which are very critical for NBFCs.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.