Assocham Takes Up NBFCs’ Case With RBI

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New Delhi, March 27: : Non-banking financial companies (NBFCs) have got a new champion in Assocham. Even as they have earned notoriety in recent years, Assocham secretary-general Jayant Bhuyan feels that the entire industry has been painted with the same brush, and this has proved to be restrictive for genuine companies. The chamber has a fairly strong NBFC membership, including some of their associations.

That’s precisely why Mr Bhuyan, in a letter to RBI governor Bimal Jalan, has written that, considering most developed economies in the world have relied heavily on the lease finance route in their developmental process, it is imperative that the Indian economy includes NBFCs as one of its major constituents.

Mr Bhuyan noted that one of the key reasons for the NBFC segment not being able to contribute significantly in the development process was the indifferent attitude shown towards it by the banking sector.

“We agree that the banking sector has shown its limitations in effecting credit delivery to the unorganised sector, particularly unincorporated bodies, but the role of NBFCs assumes critical importance here because of their effectiveness in micro-financing,” said Mr Bhuyan in his letter.

He added that the role of the non-banking sector in both manufacturing and services sector was significant and they played the role of an intermediary by facilitating the flow of credit to actual consumers where commercial banks could not reach.

“Due to their inherent strengths, like fast and easy access to market information for credit appraisal, well-trained collection machinery, close monitoring on individual borrowers and personalised attention to each client, NBFCs are in a better position to cater to the construction equipment and commercial vehicles segment,” said Mr Bhuyan. u

He noted, however, that banks in general were reluctant to provide finance to NBFCs and even if they did, the rate of interest was very high. He recommended that asset financing companies (AFCs) should not be bracketed with other NBFCs and they needed to be seen in different perspective in the light of asset-backing financing.

Assocham has recommended that the Reserve Bank of India (RBI) directs commercial banks to consider that loans granted by NBFCs by way of hypothecation of all types of automobiles, like trucks, buses, tractors, cars, three-wheelers, two wheelers and dumpers, which are registerd with the Road Transport Authority, are considered similar to leased assets for the purpose of granting working capital facilities.

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