NBFCs likely to get tax treatment parity with banks
Chidambaram, and senior officials from the department of financial services and the RBI.
“The tax authorities must accept this principle of income deferral also for NBFCs registered with RBI. NBFC is the only segment of the financial sector which is denied this tax benefit,” Raman Aggarwal, director (member, managing committee), Finance Industry Development Council (a self-regulatory organisation for asset financing NBFCs) and senior vice-president, Srei Equipment Finance, said.
According to Fitch India Rating, the gross NPAs of NBFCs may grow from 1.9% to 3 % of their gross advances in the next 12-18 months and provisioning for these will grow to Rs 345 crore in the same period from the current Rs 172 crore, the report said.
Sunil Chandiramani, partner, Ernst & Young said while bad loans of NBFCs are on the rise, these entities are taking efforts to improve their asset quality. “NBFCs are now putting in place sophisticated credit rating mechanisms and are becoming much more active on their collection cycles. But they are equally susceptible to what you would see on the banking side,” said Chandiramani.
Recently, the RBI working group on NBFCs led by former RBI deputy governor Usha Thorat had also mooted tax parity between NBFCs and banks by closing the regulatory arbitrage between banks and NBFCs. “Suitable income tax deduction akin to banks may be allowed for provisions made under the regulations. Accounting norms applicable to banks may be applied to NBFCs,” the working group said.
Another disadvantage suffered by the NBFCs are regarding provision for NPAs under Section
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