NBFCs seek further talks with RBI
According to the draft guidelines, based on the Thorat committee report on reviewing existing norms for NBFCs, these companies must classify loans as NPAs within 90 days of non-payment, bringing them on par with banks. This is much tighter than the current limit of 180 days. In addition, the draft suggests NBFCs will have to raise provisioning on standard assets to 0.40% from the current 0.25% of outstanding amount from March 31, 2014, onwards.
“Most of our customers are from the humble backgrounds and do not have a very steady flow of income. Sometimes, they need more time to repay the loans. This shorter time would mean that you are excluding these smaller borrowers and terming them as NPAs,” said Umesh Revankar, MD, Shriram Transport Finance. It is likely that Shriram Transport would make some form of communication with RBI to reconsider this norm.
Crisil expects that the average return on assets (RoA) of NBFCs to drop by 25 bps over the next 2-3 years, the rating agency said in a report. This will be primarily due to higher standard asset provisioning and revision in recognition norms for non-performing assets (NPAs).
According to the draft guidelines, this transition from 180 days to 90 days would be made in a phased manner. A 120-day norm will be applied from April 01, 2014, to March 31, 2015, and a 90-day norm thereafter.
Ramesh Iyer, MD, Mahindra Finance, believes that the central bank
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