RBI Governor meets NBFC officials

Y V Reddy, Governor of Reserve Bank of India, met representatives of the Finance Industry Development Council (FIDC), a representative body of  non-banking finance companies (NBFCs), last week.

According to a release issued by the RBI today, V Leeladhar, deputy governor, A V Sardesai, executive director and other senior officials were also present at the meeting.

"The objective of the meeting was to work out a three-year perspective for the sector," the release said.

The Governor pointed out that NBFCs were given an option to voluntarily move out of public deposits acceptance activity if they found that regulatory costs outweighed benefits. "In case an NBFC voluntarily chose to get out of public deposits, the Reserve Bank would, in fact, help the NBFC in its efforts, including imparting training and technology support," he said. He also urged them to adopt technological changes, including on-line reporting by NBFCs.

The representatives of FIDC appreciated the role of the RBI in regulating the sector. "The 1998 regulations had, indeed, helped weed out the non-serious players from the market and had infused greater discipline in the sector," the release said.

The representatives averred that they had some inherent strengths of local knowledge, credit appraisal skills, a well trained collection machinery, close monitoring of borrowers and personalised attention to each client to cater to the needs of small and medium enterprises in the rural and semi urban areas. "As such, they played a significant role in financing road transport and infrastructure. They could also reach the grass root level through micro finance. The NBFCs should, therefore, be viewed as complementing the banking sector and not as competitive," they told the central bank, the release said.

The representatives further mentioned that for regulations, they were on par with players like banks, financial institutions and housing finance companies, and desired that they should have a level playing field with housing finance companies in matters such as funding from banks and access to funds from refinancing institutions such as SIDBI or NABARD.

They pointed out that easy access to bank finance as well as refinance would help reduce their dependence on public deposits. They further urged that provisions of the debt recovery tribunal Act and the SARFAESI Act available to banks and housing finance companies could be extended to NBFCs to protect their assets.

Rationalising the number of regulations, deposit insurance and rating of NBFCs were also discussed at the meeting, the release said.