SRO for NBFCs round the bend

The much-awaited self-regulatory organisation (SRO) for non-banking finance companies (NBFCs) "" christened the Finance Industry Development Council (FIDC) "" will be registered in a couple of weeks.

The 12-member committee spearheading the institution of FIDC has managed to get the participation of about 350 of the 728 NBFCs.

"We are in talks with a domestic professional agency to help us with the drafting the code of conduct," said Mahesh Thakkar, chief co-ordinator, FIDC, and executive director, Association of Leasing and Financial Services Companies (ALFS).

FIDC will be headquartered at Mumbai with local chapters at Chennai and Kolkata, to start with.

The council, which is essentially crafted to monitor and streamline the small and medium NBFCs, will also see participation from the big NBFCs.

The participation so far has brought in about 90 per cent of the NBFC business in value terms. But there is still an urgency to rope in the remaining players. "We are striving to have no biases be it geographical or in terms of size," say inside sources.

While the immediate task is to establish the code of conduct for the industry, FIDC will also put together a systems manual compiling the rights and obligations of its members based on the best proven existing ethical practices in place in the industry.

The council will also work in tandem with the Indian Banks' Association and forthcoming credit bureau to access the defaulters' list. Information pooling of this nature is increasingly becoming critical for the finance industry.

Another important effort on the anvil will be the compilation of industry data. Members will be required to submit their annual reports, credit rating certificates and non-performing assets' information on a regular basis.

Finally FIDC will turn to the responsibility of image building. The industry, which has drawn a lot of flak from time to time, needs this exercise desperately. The council will then get into conducting seminars, training programmes for its members and also addressing the press as a coordinated voice for the industry.

Initially FIDC has been seen emerging out of three finance companies' associations coming together, namely, Equipment Leasing Association of India, Federation of Indian Hire Purchase Association and Association of Leasing and Financial Services Companies.

But now the council sees itself having evolved beyond the context of these associations and is focussing on individual members.

There are concerns that earlier attempts to set up SROs in the finance sector have not met with much success.

The Association of Merchant Bankers of India and Association of Mutual Funds of India were couple of half-hearted attempts at self-regulation that are presently being seen as having gone the purely industry promotion way.

FIDC's current concern is to bring the industry known for its internal bickerings onto an equitable platform and get a regulatory framework supplementing the legislative powers of RBI. Industry promotion will eventually feature as a role for the SRO.

"This body will have the blessings of RBI and other government authorities," Thakkar points out. The apex bank has been asking for such an effort for sometime now.

At the other end, since the collapse of CRB Capital Markets, the NBFCs have borne the brunt of ire from policy makers and regulators. FIDC sees itself also rallying some bargaining power for the NBFCs, especially in government's formulation of rules and regulations.