The recent credit policy announced by the Reserve Bank had given the existing, unregistered NBFCs time until January 8, 2000, to achieve the minimum NOF of Rs 25 lakh, while making it mandatory for all new entrants to have a minimum NOF of Rs 2 crore. Chief general manager of RBI's department of non-banking supervision VSN Murthy pointed out that it will take some time for the central bank to come out with guidelines on these takeovers since the corporate mergers and takeovers are governed by the Department of Company Affairs (DCA) guidelines, and RBI has no say in it. However, Murthy added that the apex bank is aware of the matter and is examining the possible alternatives to prevent corporates from skirting the NOF guidelines for new entrants.

Sources close to the RBI expect it to announce some modifications in the NOF criteria for the weak NBFCs (possibly hiking it to around Rs 50 lakh) along with some restrictions on such take-overs--after seeking the legal opinion and the DCA's advice on this matter.

"The rationale behind hiking the NOF to Rs 2 crore is to virtually block this sector for new entrants which do not have sufficient capital to withstand the cyclical fluctuations and the asset-liability mismatch inherent in this business," Murthy said.