New Delhi, May 29: The Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the government to take steps for resolving the crisis facing the non-banking financial companies (NBFCs).

Given the reach of the financial system in the country, particularly banks and financial institutions, NBFCs play a useful role in catalysing production processes and stimulating consumption patterns.

FICCI feels banks and financial institutions could penetrate only the periphery of the system, leaving a large segment of the economy without a financial infrastructure. President AS Kasliwal said NBFCs, numbering over 40,000, had assets to the tune of Rs 30,000 crore on March 31 1997. They channelised more than Rs 20,000 crore by way of public deposit into productive assets.

NBFCs also undertake activities like merchant banking and leasing which, in turn, generated employment for over one lakh professionals and skilled manpower. Kasliwal said high priority should be accorded to the task of creating a conducive atmosphere for the growth of NBFCs.

He emphasised the need for specific action to regulate and sustain finance companies. He added that the prudential norms evolved by the Reserve Bank on NBFCs, such as overall exposure of fixed deposits, inter-corporate loans and capital adequacy must be implemented promptly. Finance companies operated largely in high-risk areas and extended their loans for buying vehicles, consumer durables and leasing of machinery. In many cases, assets against which loans were extended have been re-transferred to them.

The chamber said a holistic view must be taken while evolving prudential guidelines on NBFCs. The debt-equity ratio, spread between deposit and lending rates and narrow margins of profitability needed to be examined.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.